Intraday Jumps, Liquidity, and U.S. Macroeconomic News: Evidence from Exchange Traded Funds
Department of Economics and Finance, La Trobe University, Melbourne 3086, Victoria, Australia
J. Risk Financial Manag. 2020, 13(6), 118; https://doi.org/10.3390/jrfm13060118
Received: 18 April 2020 / Revised: 3 June 2020 / Accepted: 3 June 2020 / Published: 5 June 2020
(This article belongs to the Special Issue Financial Risk Analysis)
This paper uses two highly liquid S&P 500 and gold exchange-traded funds (ETFs) to evaluate the impact of liquidity and macroeconomic news surprises on the frequency of observing intraday jumps. It explicitly addresses market microstructure noise-induced biases in realized estimators used in jump detection tests and applies non-parametric intraday jump detection tests. The results show a significant increase in trading costs and elevated levels of information asymmetry before observing jumps. Depth, resiliency, and trading activity are associated with the frequency of observing intraday jumps and cojumps. The ability of liquidity variables to predict intraday jumps persists after controlling for news surprises. Results show that intraday jump realizations affect the price discovery of ETFs.