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The High‐Frequency Responses of Australian Financial Futures to Unexpected Cash Rate Announcements *
Author(s) -
LU XINSHENG,
IN FRANCIS,
KOU MINGTING
Publication year - 2009
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.2009.00585.x
Subject(s) - futures contract , monetary policy , treasury , economics , cash , endogeneity , interest rate , monetary economics , futures market , event study , business , financial system , financial economics , finance , econometrics , paleontology , context (archaeology) , archaeology , biology , history
This study examines the high‐frequency responses of Australian financial futures to monetary surprises using intra‐day futures data. Using the event window method with tick data to control for the endogeneity between market interest rates and the cash rate, our empirical findings support the following. First, monetary policy announcements significantly impact not only short‐term interest rate futures but also longer‐term treasury security future markets. Second, the most significant responses of these markets occur in the event window that contains the policy announcement. Third, we also find that the monetary policy is not well anticipated by market participants until the Reserve Bank of Australia’s policy release.