The Arrival of News and Return Jumps in Stock Markets: A Nonparametric Approach

TL;DR

This paper develops a non-parametric method to analyze how news events influence stock price jumps before and after releases, revealing information leakage and market heterogeneity.

Contribution

It introduces a novel non-parametric framework for studying news-induced jumps, accounting for intraday seasonality and providing new insights into market reactions.

Findings

Non-scheduled announcements cause jumps following releases.

Pre-jumps suggest possible information leakage.

Market reactions to unexpected news vary across Nasdaq Nordic markets.

Abstract

This paper introduces a non-parametric framework to statistically examine how news events, such as company or macroeconomic announcements, contribute to the pre- and post-event jump dynamics of stock prices under the intraday seasonality of the news and jumps. We demonstrate our framework, which has several advantages over the existing methods, by using data for i) the S&P 500 index ETF, SPY, with macroeconomic announcements and ii) Nasdaq Nordic Large-Cap stocks with scheduled and non-scheduled company announcements. We provide strong evidence that non-scheduled company announcements and some macroeconomic announcements contribute jumps that follow the releases and also some evidence for pre-jumps that precede the scheduled arrivals of public information, which may indicate non-gradual information leakage. Especially interim reports of Nordic large-cap companies are found containing important information to yield jumps in stock prices. Additionally, our results show that releases of unexpected information are not reacted to uniformly across Nasdaq Nordic markets, even if they are jointly operated and are based on the same exchange rules.