Surprise and dispersion: informational impact of USDA announcements

Adrian Fernandez-Perez; Bart Frijns; Ivan Indriawan; Alireza Tourani-Rad

doi:10.1111/agec.12470

Surprise and dispersion: informational impact of USDA announcements

Adrian Fernandez-Perez, Bart Frijns, Ivan Indriawan^*, Alireza Tourani-Rad

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

5 Citations (Web of Science)

Abstract

We examine the role of information asymmetry on changes in bid‐ask spreads during major United States Department of Agriculture (USDA) announcements. Our analyses, using corn, wheat, and soybean futures, indicate that information asymmetry is significantly higher on USDA announcement days compared to nonannouncement days. We further observe that the increased information asymmetry prior to news announcements is mainly driven by the divergence in private information possessed by market participants. However, once the USDA news is released, not only the dispersion in investors’ private information but also the surprises in news announcements contribute to increased information asymmetry and widening of bid‐ask spreads.

Original language	English
Pages (from-to)	113-126
Number of pages	14
Journal	Agricultural Economics
Volume	50
Issue number	1
DOIs	https://doi.org/10.1111/agec.12470
Publication status	Published - Jan 2019
Externally published	Yes

Keywords

Agricultural commodities
BID-ASK SPREADS
Bid-ask spreads
COMPONENTS
CORN
EXPECTATIONS
FORECASTS
MARKET LIQUIDITY
PRICE DISCOVERY
PUBLIC INFORMATION
Spread decomposition
VOLUME

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10.1111/agec.12470

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@article{47ed4c3e9818402298b400aa3eddc63d,

title = "Surprise and dispersion: informational impact of USDA announcements",

abstract = "We examine the role of information asymmetry on changes in bid‐ask spreads during major United States Department of Agriculture (USDA) announcements. Our analyses, using corn, wheat, and soybean futures, indicate that information asymmetry is significantly higher on USDA announcement days compared to nonannouncement days. We further observe that the increased information asymmetry prior to news announcements is mainly driven by the divergence in private information possessed by market participants. However, once the USDA news is released, not only the dispersion in investors{\textquoteright} private information but also the surprises in news announcements contribute to increased information asymmetry and widening of bid‐ask spreads.",

keywords = "Agricultural commodities, BID-ASK SPREADS, Bid-ask spreads, COMPONENTS, CORN, EXPECTATIONS, FORECASTS, MARKET LIQUIDITY, PRICE DISCOVERY, PUBLIC INFORMATION, Spread decomposition, VOLUME",

author = "Adrian Fernandez-Perez and Bart Frijns and Ivan Indriawan and Alireza Tourani-Rad",

year = "2019",

month = jan,

doi = "10.1111/agec.12470",

language = "English",

volume = "50",

pages = "113--126",

journal = "Agricultural Economics",

issn = "0169-5150",

publisher = "Wiley-Blackwell Publishing Ltd",

number = "1",

}

TY - JOUR

T1 - Surprise and dispersion

T2 - informational impact of USDA announcements

AU - Fernandez-Perez, Adrian

AU - Frijns, Bart

AU - Indriawan, Ivan

AU - Tourani-Rad, Alireza

PY - 2019/1

Y1 - 2019/1

N2 - We examine the role of information asymmetry on changes in bid‐ask spreads during major United States Department of Agriculture (USDA) announcements. Our analyses, using corn, wheat, and soybean futures, indicate that information asymmetry is significantly higher on USDA announcement days compared to nonannouncement days. We further observe that the increased information asymmetry prior to news announcements is mainly driven by the divergence in private information possessed by market participants. However, once the USDA news is released, not only the dispersion in investors’ private information but also the surprises in news announcements contribute to increased information asymmetry and widening of bid‐ask spreads.

AB - We examine the role of information asymmetry on changes in bid‐ask spreads during major United States Department of Agriculture (USDA) announcements. Our analyses, using corn, wheat, and soybean futures, indicate that information asymmetry is significantly higher on USDA announcement days compared to nonannouncement days. We further observe that the increased information asymmetry prior to news announcements is mainly driven by the divergence in private information possessed by market participants. However, once the USDA news is released, not only the dispersion in investors’ private information but also the surprises in news announcements contribute to increased information asymmetry and widening of bid‐ask spreads.

KW - Agricultural commodities

KW - BID-ASK SPREADS

KW - Bid-ask spreads

KW - COMPONENTS

KW - CORN

KW - EXPECTATIONS

KW - FORECASTS

KW - MARKET LIQUIDITY

KW - PRICE DISCOVERY

KW - PUBLIC INFORMATION

KW - Spread decomposition

KW - VOLUME

U2 - 10.1111/agec.12470

DO - 10.1111/agec.12470

M3 - Article

SN - 0169-5150

VL - 50

SP - 113

EP - 126

JO - Agricultural Economics

JF - Agricultural Economics

IS - 1

ER -

Surprise and dispersion: informational impact of USDA announcements

Abstract

Keywords

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