The Value of Public Information: Market Microstructure Noise and Price Volatility Spillovers in Agricultural Commodity Markets

After 2013, major grain-related USDA announcements have been rescheduled to be released at 11:00 am CDT. Such a change granted researchers a great chance to study market volatilities and spillovers react to significant USDA information on real time. Also, with new statistical methods, researchers now can separate efficient volatility from noise volatility. In this paper, we adopt a recently developed method, which is called Markov Chain estimator (MC estimator), to study intraday volatility and volatility spillover between corn and soybean futures during USDA announcement days. Our results suggest that volatilities in both corn and soybean would response to USDA announcements immediately after the news being published. The elevated level of volatilities would not settle down within the first hour after announcements. Also, more persistent spillover occurs at equilibrium level, which is measured by efficient return spillover, than at noise level, which is measured by noise return spillovers.