HOW MARKETS PROCESS INFORMATION - NEWS RELEASES AND VOLATILITY

We examine the impact of scheduled macroeconomic news announcements on interest rate and foreign exchange futures markets. We find these ann ouncements are responsible for most of the observed time-of-day and da y-of-the-week volatility patterns in these markets. While the bulk of the price adjustment to a major announcement occurs within the first m inute, volatility remains substantially higher than normal for roughly fifteen minutes and slightly elevated for several hours. Nonetheless, these subsequent price adjustments are basically independent of the f irst minute's return. We identify those announcements with the greates t impact on these markets.