The impact of macroeconomic announcements in the Brazilian futures markets

Produced by: 
PUC Rio
Available from: 
April 2014
Paper author(s): 
Francisco Santos
Márcio Garcia
Marcelo Medeiros
Topic: 
Macroeconomics - Economic growth - Monetary Policy
Year: 
2014

The estimation of the impact of macroeconomic announcements in the Brazilian futures markets is used to uncover the relationship between macroeconomic fundamentals and asset prices. Using intraday data from October 2008 to January 2011, we find that external macroeconomic announcements dominate price changes in the Foreign Exchange and Ibovespa futures markets, while the impact of the domestic ones is mainly restricted to Interest Rate futures contracts. We additionally propose an investment strategy based on the conditional price reaction of each market that showed promising results in an out-of-sample study, where we are able to correctly identify returns’ signals, conditional on the surprise’s signal, in approximately 70% of the cases. Finally, we provide evidence that price reactions are conditional on the state of the economy and document the impact on volume and bid-ask spreads.

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Research section: 
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