Unlike Equity Markets, Insider Trading on currencies / commodities / index funds / fixed income instruments is more challenging to bust.
With Equities, you would be tipped by your friend who's a CFO somewhere about a potential acquisition or the next earnings release in advance.
However, the above instruments move on different news: Macro Economic Indicators (Non Farm Payrolls, ISM PMIs..) and Geo-political events.
In the Paper posted by the ECB below: https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp190…
They claim based on data from Jan. 2008 to March 2014: "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."
We should not forget that these economic releases are guarded with top security processes: http://www.bls.gov/bls/data_integrity.htm
"Importantly, we also show that the price drift has increased since 2007"
What's your thoughts on this? Will Wall Street ever play the game by the rules?
Have you actually read the paper?
Twice
Isn't it the case that the authors offer two potential explanations for this pre-announcement drift phenomenon? One of those two doesn't involve nefarious shenanigans...
I really doubt the consistency of super forecasting though... we know that financial modelling doesn't work, especially that most of them we build through historical data.. In addition we have many evidences from cases in the past that this has happened across all asset classes
Hmmm, you sure you're reading the same paper?
From the section on "Proprietary Information": "...results (available upon request) suggest that early access to proprietary information permits forecasting announcement surprises in some cases"
It appears that the authors aren't all that certain about the source of the phenomenon and are suggesting further investigation. I am inclined to believe that, as usual, in reality it's a bit of everything.
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