30% of public announcements traded before official release

Yes…you read that headline correctly.  Let it remind you that the average investor does not have an information advantage. 

The headline comes courtesy of Barry Ritholtz (The Big Picture), from a working paper created by the European Central Bank.  The paper discusses price movements in stock index and Treasury futures markets just before macroeconomic announcements.


Per the abstract:

We examine stock index and Treasury futures markets around releases of U.S.macroeconomic announcements. Seven out of 21 market-moving announcementsshow evidence of substantial informed trading before the official release time. Prices begin to move in the “correct” direction about 30 minutes before the release time.The pre-announcement price drift accounts on average for about half of the total price adjustment. These results imply that some traders have private information about macroeconomic fundamentals. The evidence suggests that the pre-announcement drift likely comes from a combination of information leakage and superior forecasting based on proprietary data collection and reprocessing of public information.



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