Economic Analysis and Policy 72 (2021) 87–101

Contents lists available at ScienceDirect

Economic Analysis and Policy

journal homepage: www.elsevier.com/locate/eap

Modelling economic policy issues

Identifying the role of consumer and producer price index

announcements in stock index futures price changes✩
∗
Guofang Liu a , Xi Fang a , , Yuan Huang b , Weidong Zhao a
a
School of Finance, Shanghai Lixin University of Accounting and Finance, Shanghai, China
b
Department of Economics, Vanderbilt University, Nashville, United States of America

article info a b s t r a c t

Article history: This study examines the impact of Chinese macroeconomic announcements regarding
Received 24 May 2021 consumer price index (CPI) and producer price index (PPI) on the China Security Index
Received in revised form 17 July 2021 300 futures. We find that when the surprise direction of CPI news is consistent with
Accepted 19 July 2021
that of PPI, the reactions of stock index futures price to CPI announcements are stronger.
Available online 2 August 2021
Considering the heterogeneity of financial institutions, both PPI and CPI announcements
JEL classification: have a more significant impact on the price of stock index futures. Furthermore, the
G13 impact of macroeconomic news announcements on the price of stock index futures
G14 is related to investors’ trust in financial institutions. The news surprise of financial
C23 institutions with high forecast accuracy and rich forecasting experience has a more
G23 significant effect on stock index futures.
Keywords: © 2021 Economic Society of Australia, Queensland. Published by Elsevier B.V. All rights
News surprise reserved.
Institutional heterogeneity
Forecast accuracy
Forecasting experience

1. Introduction

The impact of macroeconomic announcements on financial markets has long been a concern of academic research.
While early studies focus on documenting the existence of such impact (McQueen and Roley, 1993; Ederington and
Lee, 1993), recent research tends to investigate the effects of macroeconomic announcements on some specific financial
markets, such as stock markets, foreign exchange markets, commodity futures markets, and bond markets, as well as the
mechanism behind these effects (Elder et al., 2012; Wongswan, 2006; Bauwens et al., 2005; Kurov and Stan, 2018).
Unlike markets for other financial securities and derivatives, the stock index futures market has the function of not only
price discovery but also hedging systemic financial risks, which makes it an important risk management tool for investors.
With a growing emphasis on preventing and resolving systemic financial risks in central banks of various countries, the
forward guidance of macroeconomic policies concerning the stock index futures market has regained focal attention in
research.

✩ Acknowledgments: This work is funded by the project of ‘‘Research on the Theory Mechanism and Policy of Expectation Management to Improve
the Effectiveness of Chinese Monetary Policy’’ (Youth Project of National Natural Science Foundation of China, No. 71703179). And it is also sponsored
by ‘‘Chenguang Program’’ supported by Shanghai Education Development Foundation, China and Shanghai Municipal Education Commission, China
(17CG62) and ‘‘Shanghai University Young Teacher Training Funding Program, China’’ (ZZLX19034).
∗ Correspondence to: No. 995 Shangchuan Road, Shanghai 201209, China.
E-mail addresses: liuguofang1127@aliyun.com (G. Liu), fx_artemis@163.com (X. Fang), yuan.huang@vanderbilt.edu (Y. Huang),
zwd_tj@tongji.edu.cn (W. Zhao).

https://doi.org/10.1016/j.eap.2021.07.009
0313-5926/© 2021 Economic Society of Australia, Queensland. Published by Elsevier B.V. All rights reserved.
G. Liu, X. Fang, Y. Huang et al. Economic Analysis and Policy 72 (2021) 87–101

Fig. 1a. Mean value and realized value of forecast CPI.

There is a lack of evidence on the impact of the news of various macroeconomic changes on stock index futures, with
no consensus on whether the announcements of consumer price index (CPI) and producer price index (PPI) affect stock
index futures (see Miao et al., 2014; Cheng and Zhou, 2013; Chen et al., 2016). Miao et al. (2014) examine the change of
the form of the post-announcement stock index futures price movements in the United States and find that both CPI and
PPI announcements cause ‘‘price-jumps’’. However, Cheng and Zhou (2013) find that CPI and PPI announcements have no
influence on the stock futures market. They argue that inconsistent results are related to CPI and PPI having varied impacts
on different industries. Further, they highlight that both CPI and PPI adjust periodically, which means that investors end up
having different interpretations of both indexes. These differences in interpretations contribute to inconsistent findings.
Chen et al. (2016) find that reactions of futures price to CPI announcements are stronger for bad CPI news; they argue
that CPI announcements work only when investors pay greater attention to them.
This study uses CSI 300 stock index futures prices and data on Chinese macroeconomic news announcements to
investigate whether announcements regarding CPI and PPI information can influence the price of stock index futures
and explore the mechanism behind this effect.
We posit that as PPI and CPI are released simultaneously, different directions of news surprise,1 also known as forecast
bias,2 can lead to opposite adjustments in investors’ open interest, thus weakening the impact of these macroeconomic
news announcements on stock index futures prices. When financial institutions’ forecast biases of CPI and PPI are of the
same direction, announcements of both indexes can be identified more easily.
Moreover, existing research measures forecast bias by using the difference between the mean of forecasted values
from different financial institutions and the realized values, thus failing to capture the heterogeneity among financial
institutions. However, in reality, financial institutions differ widely due to the characteristics of their shareholders,
business focus, diversified organizational structures, and teams of analysts with their own advantages and disadvantages.
Consequently, differences in the effect of forecast bias from different financial institutions on stock index futures cannot
be ignored. Therefore, incorporating the heterogeneity of financial institutions may prove to be useful in clarifying the
impact of PPI and CPI announcements on stock index futures. Additionally, existing literatures (Miao et al., 2014; Chen
et al., 2016) use the predicted average value to calculate surprise, which is not in line with the fact. As some institutions’
forecasts come out considerably late, they have limited guidance regarding the behavior of market investors. Therefore, the
function of the forecast value of each institution is different from the information it contains. The average value does not
consider adequate information. As shown in Figs. 1a and 1b, the average value does not account for many heterogeneity
characteristics of the institution.
To this end, we attempt to extend the research on the impact of PPI and CPI on futures markets in the following ways.
First, we allow for the CPI and PPI forecast bias in our examination of the impact of CPI and PPI announcements on the
futures market. For this, we develop subgroups based on the consistency of the CPI and PPI forecast bias. Second, we
incorporate the interaction of institutional divergence and forecast bias into the baseline model to determine whether
this divergence causes a difference in the impact of macroeconomic announcements on stock index futures. Third, we
investigate the impact of each institution’s forecast bias on stock index futures prices with fixed effect and random effect
models. In each model, we divide the sample into subsamples based on the institution’s forecast accuracy and experience
in forecasting CPI and PPI and further explore the role of institutional heterogeneity.

1 News surprise refers to the difference between the mean values of financial institutions’ forecasted macroeconomic values and the realized
values. When the realized values exceed the forecast values, financial institutions underestimate the macroeconomic variables and vice versa.
2 Forecast bias refers to the difference between financial institutions’ forecast mean value and the true value of macro information. The true
value is higher than the predicted value in the direction of underestimation. The predicted value is higher than the true value in the direction of
overestimation.

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Fig. 1b. Mean value and realized value of forecast PPI.

This study contributes to the literature in two ways. First, it helps understand the impact of CPI announcements on
stock index futures prices and clarifies the inconsistent conclusions on this topic. We find that the effect of macroeconomic
news announcements on stock index futures prices is weakened due to the divergent directions between the CPI and
PPI forecast biases. In subsamples wherein CPI and PPI forecasts are biased in the same direction, we find a significant
impact from CPI announcements on stock index futures prices. Second, our study extends the research on the impact of
macroeconomic news announcements on stock index futures prices to the financial institution level and documents the
role of institutional heterogeneity. We find that when controlling for the financial institution fixed effect, forecast bias
has a salient impact on stock index futures. This impact is more significant for financial institutions with higher forecast
accuracy and more forecasting experience.
The remainder of this study is organized as follows. Section 2 describes the literature review, theoretical analysis, and
research hypotheses. Section 3 introduces our empirical models, variables, and samples. Section 4 presents the analysis
and empirical results. Finally, Section 5 concludes the study and provides further discussions.

2. Theoretical framework and research hypothesis

Miao et al. (2014) examine 19 macroeconomic news announcements, including CPI and PPI together with the price-
jump of Standard & Poor’s 500 Futures, and find a significant impact of 11 kinds of announcements, including CPI and
PPI releases, on S&P 500 Futures price. Cheng and Zhou (2013) focus on the intraday effects of 14 macroeconomic
announcements, including CPI and PPI, on the CSI 300 stock index futures price and find no significant impact. Chen
et al. (2016) study the effect of five macroeconomic announcements, including CPI and PPI, on the CSI 300 stock index
futures price and find that the impact of CPI announcements on stock index futures prices appears only when investors
pay sufficient attention. However, PPI announcements’ impact on stock index futures prices remains insignificant.
We suspect that this inconsistency is due to omitted variables and sample selection. Theoretically, according to the
relationship between inflation and GDP growth, PPI and CPI are supposed to affect stock index futures prices for the
following reasons. First, a change in CPI affects aggregate demand through wealth redistribution. Second, PPI changes move
aggregate supply through changing firms’ costs. Third, inflation leads to growing structural imbalances in the economy
(Lu, 1987). Investors participate in the stock index futures market to hedge macroeconomic risks and speculate in a market
with macroeconomic fluctuations. Therefore, investors pay close attention to CPI and PPI announcements. Accordingly, we
formulate the first research hypothesis as follows:
H1: CPI and PPI announcements have a significant impact on stock index futures prices.
Next, we focus on whether the consistency,3 of CPI and PPI forecast biases affects stock index futures prices. Macroe-
conomic news affects stock index futures prices through investors’ decisions. According to anchoring and adjustment
heuristics, investors first set a target value of stock index futures open interest based on macroeconomic forecast and then
make adjustments according to the bias of forecasted values and actual values (forecast bias) (Armstrong, 1982). When
investors find out that they have overestimated the economy with given information, stock index futures prices decrease
as investors close out positions and reduce open interest. Otherwise, stock index futures prices increase. However, some
macroeconomic information is concurrently released, parts of which can cause both overestimation and underestimation
of the economy, thus causing opposite effects on stock index futures price, which may counteract each other. Therefore,
we observe a statistically insignificant effect of macroeconomic announcements on stock index futures prices. The CPI

3 The consistency of news surprise or consistency of forecast bias refers to whether institutions’ PPI and CPI forecasts are biased in the same
direction. It is consistent when institutions either overestimate both CPI and PPI, or underestimate neither of them. Otherwise, it is inconsistent.

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and PPI indexes are simultaneously announced and contain similar information. When the forecast biases of both indexes
are of the same direction investors react to both strands of information similarly. Thus, we observe a significant effect
of macroeconomic announcements on stock index futures price (Wu et al., 2016). Likewise, when the forecasts are
biased in opposite directions, the macroeconomic announcements’ impact on stock index futures price may be weakened.
Accordingly, we formulate our second research hypothesis as follows:
H2: When financial institutions’ CPI and PPI forecasts are biased in the same direction, the impact of CPI and PPI
announcements on stock index futures prices is strengthened significantly.
Furthermore, considering that there are several financial institutions that release non-identical price index forecasts
each month, we incorporate their forecasting divergence into our model. Existing literature uses the mean value of
financial institutions’ forecasts when measuring forecast bias (Miao et al., 2014; Balduzzi et al., 2001), which neglects the
difference of institutions’ forecasts. Our study defines institutional divergence as the extent to which financial institutions’
forecasts on price indexes are different from each other, measured by the standard deviation of financial institutions’
forecasts in each month. Investors pay attention to institutional divergence to know whether there is an opportunity
for transactions (Miller, 1977). When all investors have identical expectations, everyone reacts to the macroeconomic
announcements similarly, which means no one can find a counterparty, and thus, there is no trade. Conversely, when the
forecast divergence is large, investors can make transactions more easily, and the volume of transactions increases. Thus,
when forecast bias appears, more investors adjust their open interest, and macroeconomic news announcements have a
more significant effect on stock index futures prices (Liu and Lin, 2011). Accordingly, we propose the following research
hypothesis:
H3: CPI and PPI announcements have a stronger impact on stock index futures prices when there is a large institutional
divergence.
Finally, we focus on how macroeconomic announcements affect stock index futures prices. Former studies mainly use
aggregate macro data to analyze the impact of macroeconomic announcements on stock index futures prices (Miao et al.,
2014; Chen et al., 2016; Balduzzi et al., 2001). Accordingly, researchers tacitly assume that all forecasting institutions are
homogeneous, which excludes institutions’ heterogeneity. This heterogeneity comprises institutions’ different abilities in
making forecasts (Jacob et al., 1999), as well as their idiosyncratic influence on different groups of investors (Wu and Liu,
2003). Analysts from different financial institutions have distinct backgrounds and focuses and thus cultivate different
forecasting abilities. Each financial institution has its unique group of clients and influences a certain number of market
participants. Investors choose to accredit a financial institution and adjust their open interests based on that institution’s
forecast bias. Furthermore, in reality, financial institutions’ monthly forecasts are not announced simultaneously but
gradually at different times during a particular month. Therefore, investors must wait and invest after all the forecasts
of their preferred institutions are released to make decisions based on the predicted values. Investors are likely to
make investment decisions based on some financial institution’s forecasts. Therefore, when exploring the impact of
macroeconomic announcements on stock index futures prices, we must consider investors’ psychology to analyze how
investors’ trust in financial institutions influences their decisions.
When choosing which financial institution to trust, investors place high value on the institution’s forecasting accuracy
(Merkley et al., 2017). Investors expect the institution they trust to provide accurate forecasts to reduce their adjustment
cost or loss (You et al., 2017; Barber et al., 2001). A financial institution’s forecasting accuracy refers to the accuracy of the
financial institution’s macroeconomic forecasts before each macroeconomic news announcement. Institutions with higher
forecasting accuracy are more popular and trusted among investors. Hence, their forecast bias has a stronger impact on
stock index futures prices after macroeconomic announcements.
In addition to forecasting accuracy, investors value the institution’s experience in forecasting. Researchers document
that experienced analysts are less likely to have imitation behavior when releasing their forecasts (Nolte et al., 2014).
Experienced analysts tend to take the risk of sending useful information to the market (Clement and Tse, 2005), and
forecasting experience is directly related to forecasting accuracy (Clement, 1999). In practice, not all financial institutions
forecast CPI and PPI on a monthly basis. Some institutions have a high forecasting accuracy while having low forecasting
frequency. For such institutions, it is hard for investors to believe in their next forecast. Investors prefer to trust more
experienced financial institutions, and consequently, their forecast bias has a stronger effect on stock index futures prices.
Accordingly, we propose the following hypotheses:
H4a: Forecast bias of financial institutions with a higher forecasting accuracy has a stronger impact on stock index
futures prices when macroeconomic announcements are made.
H4b: Forecast bias of more experienced financial institutions has a stronger impact on stock index futures prices when
macroeconomic announcements are made.

3. Empirical methodology

3.1. Model and variables

To test H1, we employ the regression model in Chen et al. (2016) as follows:

∆pikt = αik + βik ∗ Sit + βjk ∗ Controljt + ξikt (1)

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We define variables in Eq. (1) as follows:

1. Dependent variable: This is the price reactions of stock index futures to macroeconomic news surprises (∆pikt ).
Based on the widely adopted definition in the existing studies (Miao et al., 2014; Chen et al., 2016; Balduzzi et al., 2001),
we define the price reactions of stock index futures price as follows
p15,it − pk,it
∆pikt =
pk,it
Here, P15,it is the price of stock index futures 15 min after the announcement of macroeconomic information i at time
t. Pk,it is the price of stock index futures at k minutes after (before) the announcement of macroeconomic information i at
time t.4 Ederington and Lee (1993) find that new information is completely absorbed within 15 min after its release. Hence,
p15,it − pk.it denotes price adjustment triggered by macroeconomic news announcements. ∆pikt denotes the price reactions
of stock index futures to macroeconomic news surprises during the k minutes after macroeconomic announcement i at
time t
2. Independent variables: These are the forecast bias (Sit ). Following the commonly employed definition in former
studies (Miao et al., 2014; Chen et al., 2016; Balduzzi et al., 2001), we define news surprise as follows:
Rit − Eit
Sit =
σi
where Rit is the realized value of macroeconomic information i at time t. Correspondingly, Eit is the mean value of financial
institutions’ forecast values for information i. Sit is the news surprise of macroeconomic information i at time t, which is a
standardized bias of macroeconomic forecasts from the actual values. Controljt denotes control variables, which comprise
news surprise of other concurrently released macroeconomic information. βik is the sensitivity of the price change to news
surprise, which is theoretically supposed to be negative. This is because investors buy more stock index futures if news
surprise is positive; consequently, the price of stock index futures at time k increases, and vice versa. βjk is the sensitivity
of the price change to control variables. If H1 holds, we expect that βik will be significantly negative.
To verify H2, we divide the whole sample into subsamples based on the sign of CPI and PPI news surprises. If SCPIt
and SPPIt have the same sign, we assign the corresponding observations into the identical-news-surprise group. If not, we
assign them into the different-news-surprise group. If H2 holds, we expect βik to be negative with larger significance in
the identical-news-surprise group as compared to the different-news-surprise group and the whole sample.
For H3, we incorporate a dummy variable indicating the institutional divergence into Eq. (1) and further classify the
samples into two groups based on the sign of CPI and PPI news surprise. We construct our regression model as follows:

∆pikt = αik + βik ∗ Sit + βjk ∗ Controljt + φik ∗ DiH + ηik ∗ DiH ∗ Sit + ξikt (2)

DiH is the dummy variable for institutional divergence, which is coded as one for the first half of observations with higher
standard deviation in forecasting, and zero for the other half of observations. The estimated coefficient of DiH is φik . DiH ∗ Sit ,
which is the interaction of the institutional divergence dummy and news surprise, with coefficient ηik . ηik , which is the
focus of our study, is supposed to be negative. If ηik is significantly negative, this indicates that high institutional divergence
strengthens the impact of macroeconomic announcements on stock index futures prices. Other details are similar to Model
(1).
If H3 holds, we expect ηik to be significantly negative.
To verify H4a and H4b, we consider the heterogeneity of financial institutions and control for institutional fixed effects
in the empirical analysis. Accordingly, we construct the following fixed effect model:

∆pikt = αik + βik ∗ Simt + βjk ∗ Controljmt + ξimt (3)

Simt is the forecast bias (news surprise) of financial institution m on macroeconomic variable i at time t. Controljmt is a
control variable that denotes news surprises of institution m toward the other concurrent macroeconomic announcements.
Following You et al. (2017), we define institutional news surprise as follows:
Rit − Eimt
Simt =
Rit
Rit is the realized value of macroeconomic variable i, and Eimt is the corresponding expected value of variable i from
financial institution m at time t. Thus, Simt measures the extent to which each financial institution’s forecast value deviates
from the realized value. βik denotes the sensitivity of the price change to institutional news surprise. Theoretically, we
expect this coefficient to be negative. We can generate different institutional news surprises using forecast values from
each financial institution, and there are different institutions that forecast CPI and PPI every month. Hence, we can
construct an institution-month unbalanced panel dataset.

4 k < 0 means before macroeconomic announcement; k>0 means after macroeconomic announcement; k=0 represents the moment the
macroeconomic information is released.

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Table 1
Macroeconomic realized value, mean forecast value, and news surprise.
Realized value Mean forecast value News surprise
CPI(%) PPI(%) CPI(%) PPI(%) CPI PPI
Min 0.76 −5.95 1 −5.9 −4.07 −2.39
P25 1.60 −2.87 1.6 −2.8 −0.67 −2.8
Median 2.08 −1.62 2.2 −1.6 0 −1.6
P75 3.02 5.5 2.9 5.5 0.51 5.5
Max 6.45 7.8 6.3 7.7 2.54 3.36
Mean 2.57 −0.01 2.58 0.01 −0.07 −0.06
S.D. 1.39 4.38 1.35 4.27 1 1
N 83 83 83 83 83 83

This table reports summary statistics of the macroeconomic realized value (Rit ), forecast value
R −E
(Eit ), and news surprise (Sit ), where Sit = it σ it and i = CPI or PPI. The news surprise is used
i
in the regressions of Model (1): ∆pikt = αik + βik ∗ Sit + βjk ∗ Controljt + ξikt .

To test H4a, we run regressions using subsamples generated according to the forecast accuracy using Model (3).
Following Merkley et al. (2017), our study measures forecast accuracy with the mean of the absolute value of institutions’
forecast bias during the past 12 months, calculated as follows:
t −1
1 ∑
FEimt = |Simk |
12
k=t −12

The bottom half of the observations with lower FEimt constitutes the high-accuracy group. The other half constitutes
the low-accuracy group.
If H4a holds, βik will be negative, and there would be more time points wherein βik is significant in the high-accuracy
group as compared to the low-accuracy group and the whole sample.
Finally, for H4b, similar to H4a, we run regressions using subsamples generated according to institutions’ forecasting
experience, measured by recorded forecast frequency. We assign the top 50% of observations with higher forecast
frequency to the high-frequency group – these institutions are more experienced in macroeconomic forecasting – and
the bottom 50% less experienced institutions to the low-frequency group.
If H4b holds, βik will be negative, and there would be more time points wherein βik is significant in the high-frequency
group as compared to the low-frequency group and the whole sample.

3.2. Sample selection and statistics summary for main variables

All macroeconomic data in this study, including realized values and time of announcements, are obtained from the
National Bureau of Statistics of China (NBSC). We obtain predicted macroeconomic data and CSI 300 stock index futures
prices from the Wind database. The sample period is from January 2011 to November 2017.

3.2.1. Macroeconomic news announcement

This study focuses on CPI and PPI announcements over the period 2011–2017. During our sample period, NBSC released
the realized value of both indexes simultaneously every month, which amount to 83 announcements in total. Among
them, 76 announcements occur at 9:30 am, six at 10:00 am, and only one at 1:30 pm. Table 1 displays summary statistics
regarding realized value, forecast value, and news surprise for CPI and PPI. Notably, PPI is more volatile than CPI. The
standard deviation of PPI is 4.38, while that of CPI is 1.39. Mean forecast value is the mean value of institutions’ expected
macroeconomic values of each term. Statistically, mean forecast value is similar to the realized values. For instance, the
difference between realized and forecasted value of CPI (2.57 and 2.58, respectively) is −0.01. The standard deviation of
the realized value of CPI is 0.04, which is larger than the predicted value of CPI (1.39 and 1.35, respectively). The distance
between the realized and forecasted value of PPI (−0.01 and 0.01, respectively) is −0.02, and the standard deviation of
realized value of PPI is 0.11 more than that of the predicted value (4.38 and 4.27, respectively). Similarly, PPI is more
volatile with respect to the forecast value. The maximum and minimum of news surprise of CPI and PPI are considerably
different (−0.47 and 2.54 and −2.39 and 3.36, respectively). However, the mean values are considerably close (−0.07 and
−0.06, respectively).

3.2.2. Volatility of stock index futures prices

Our study utilizes the per-minute opening price of CSI 300 stock index futures price as the proxy of stock index futures
prices.5 over the period 2011–2017. From January 2011 to November 2017, there were 68 CSI 300 stock index futures

5 Per-minute opening price refers to the trade price of the stock index futures at the start of every minute.

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Table 2
Volatility of CSI 300 stock index futures price.
−10 −9 −8 −7 −6 −5 −4 −3 −2 −1 0
Min −0.29 −0.32 −0.36 −0.47 −0.70 −0.60 −0.67 −0.86 −1.10 −0.99 −0.74
Max 0.72 0.64 0.62 0.65 0.65 0.79 0.77 0.81 0.72 0.66 0.95
Mean 0.03 0.01 0.02 0.00 0.00 −0.01 0.00 0.01 −0.02 −0.01 0.03
S.D. 0.18 0.17 0.19 0.20 0.22 0.23 0.22 0.25 0.33 0.31 0.31
N 68 68 68 68 68 68 68 68 68 68 68
1 2 3 4 5 6 7 8 9 10
Min −0.82 −16.16 −16.14 −16.15 −16.07 −16.14 −16.17 −16.16 −16.16 −16.11
Max 0.95 7.84 7.91 11.89 12.01 12.00 12.02 11.97 11.95 11.96
Mean 0.04 0.31 0.32 0.50 0.51 0.51 0.53 0.53 0.53 0.53
S.D. 0.33 2.91 2.90 3.22 3.22 3.23 3.24 3.25 3.25 3.24
N 68 68 68 68 68 68 68 68 68 68

This table reports summary statistics of price reactions of CSI 300 stock index futures price, between 10 min before macroeconomic news release
to 10 min after. The volatility of CSI 300 stock index futures price (δ pikt ) is the dependent variable.

Table 3
Institutional forecast value and institutional news surprise.
Institutional forecast value Institutional news surprise
CPI(%) PPI(%) CPI PPI
Min 0.25 −6.3 −2 −32.33
P25 1.7 −2.5 −0.074 −0.036
Median 2.3 −1.5 −0.003 0.024
P75 3.2 3.5 0.055 0.101
Max 6.7 8 0.86 41
Mean 2.66 0.037 −0.027 0.035
S.D. 1.37 4.06 0.18 1.7
N 2186 1867 2186 1867

This table reports summary statistics of financial institutions’ forecast

R −E
values (Eimt ) and news surprise (Simt ), where Simt = it R imt and i = CPI or
it
PPI. The financial institutions’ news surprise is used in the regressions of
Model (3): δ pikt = αik + βik ∗ Simt + βjk ∗ Controljmt + ξimt .

trade-and-announce days6 in total During this period, NBSC made 83 CPI and PPI related announcements, of which 15
occurred on the weekend. Usually, excessive information is released on weekends. Considering that our study focuses on
price indexes, and the opening price on Monday is contaminated by excessive noise from the weekend, and thus, can bias
our analysis, we follow Chen et al. (2016) and drop all announcements made on weekends. On each market day, there
are CSI 300 stock index futures contracts with different delivery months trading in the market. We follow the standard
method employed in the literature and construct a transaction product series using the most active CSI 300 stock index
futures contract on each trade day (Cheng and Zhou, 2013; Elder et al., 2012; Hu and Xiong, 2013) and study the price
adjustment based on this product series. Following extant literature, we use the price change within the 20-minute time
window, which is 10 min before and after macroeconomic news announcements (k∈[−10,10]).
Table 2 reports the summary statistics for the volatility of CSI 300 stock index futures price. From 10 min before
macroeconomic news release to 10 min after, the price reaction of CSI 300 stock index futures price increases from −16.17
to 12.02, and the standard deviation increases from 0.18 to 3.25.

3.2.3. News surprise

During the sample period, 102 Chinese financial institutions made forecasts on price indexes. Not every institution
makes forecasts every month, and the institutions that predict price indexes vary monthly. The highest forecast frequency
is 68, the lowest is 1, and the average number of forecasts is 14. Less than 25% of institutions made more than 35
forecasts, and less than 25% of institutions forecasted less than four times. Table 3 provides the summary statistics for
financial institutions’ forecast values and news surprise. Compared to the mean forecast value in Table 1, we obtain more
observations on institution forecasts – 2186 for CPI forecast and 1867 for PPI, respectively—because we use the sample
at an individual level. Note that we have different sample sizes in CPI and PPI forecasts because some institutions predict
only one price index; however, such instances are few. Additionally, the maximum of institutions’ forecast value is larger
than the mean value in Table 1 (6.7 in CPI and 8 in PPI, respectively), while the minimum value is smaller (0.25 in CPI and
−6.3 in PPI, respectively). Compared with news surprise in Table 1, the standard variance of institutional news surprise
varies little (0.18 and 1.7, respectively).

6 Trade-and-announce days refer to the market days of CSI 300 stock index futures that happen to have macroeconomic announcements.

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Table 4
Adjustment of stock index futures price in response to macroeconomic announcements.
k −10 −9 −8 −7 −6 −5 −4 −3 −2 −1
CPI −0.0415 −0.0387 −0.0295 −0.0442 −0.0355 −0.0343 −0.0365 0.0573 0.0625 −0.0192
(−0.1072) (−0.0998) (−0.0760) (−0.1142) (−0.0922) (−0.0892) (−0.0947) (0.1655) (0.1801) (−0.4891)
PPI 0.3982 0.3968 0.3979 0.3932 0.4019 0.4145 0.3961 0.3889 0.3816 −0.0229
(1.0296) (1.0241) (1.0246) (1.0162) (1.0437) (1.0793) (1.0294) (1.1241) (1.1002) (−0.5842)
0 1 2 3 4 5 6 7 8 9 10
−0.0153 −0.0305 −0.0265 −0.0262 −0.0391 −0.0370 −0.0429* −0.0356 −0.0456** −0.0369* −0.0153
(−0.4067) (−0.8232) (−0.6735) (−0.8671) (−1.5253) (−1.3453) (−1.6816) (−1.5283) (−2.0207) (−1.8133) (−0.7203)
−0.0235 −0.0061 −0.0069 −0.0128 −0.0271 −0.0205 −0.0290 −0.0172 −0.0022 −0.0068 −0.0211
(−0.6275) (−0.1644) (−0.1762) (−0.4235) (−1.0556) (−0.7482) (−1.1395) (−0.7413) (−0.0976) (−0.3346) (−0.9935)

This table estimates the impact of macroeconomic announcements on stock index futures prices, by the regression of Model (1): ∆pikt =
αik + βik ∗ Sit + βjk ∗ Controljt + ξikt at every minute from 10 min before macroeconomic news release to 10 min after. Sit is news surprise of
macroeconomic information i at time t, which is the mean standardized bias of macroeconomic forecasts from the actual values, with i = CPI or
PPI. T-statistics are reported in parentheses. Coefficients marked with *, **, and *** are significant at the 10%, 5%, and 1% levels, respectively.

Table 5
Consistency of CPI and PPI news surprise during different sample periods.
Before May 2014 After May 2014
Number of consistent news surprises 20 18
Number of inconsistent news surprises 13 17

This table compares samples in two periods: from January 2011 to November 2017 and
from January 2011 to May 2014. We find a big difference in the consistency of CPI and
PPI news surprises during both periods. If there is a higher number of inconsistent news
surprises, the CPI and PPI news surprises are more of the opposite signs; if there is a
higher number of consistent news surprises, the CPI and PPI news surprises are more of
the same sign. A higher number of inconsistent news surprises can significantly reduce
the impact of macroeconomic announcements on stock index futures prices.

4. Regression results

4.1. Consistency of the direction of news surprise, macroeconomic announcements, and stock index futures price volatility

We begin our empirical analysis by using Model (1) to examine the impact of macroeconomic announcements on stock
index futures prices. Next, we run regressions within subsamples generated based on whether the news surprises of CPI
and PPI have the same sign. Finally, we incorporate the interaction of institutional divergence and news surprise into the
baseline model.
Table 4 reports the results of Model (1). It shows that CPI announcements begin to affect stock index futures prices
between six to nine minutes after the release, and the estimated coefficient of news surprise is negative. However, PPI
announcements do not have an impact on stock index futures prices. Thus, the regression results in Table 4 support the
hypothesis of CPI in H1 but not PPI.
These results indicate that six minutes after investors find out the difference between expected and realized values
of CPI, they start to adjust their open interest and move the futures prices. However, they do not seem to react to the
discrepancy between the predicted and actual PPI values. Considering that the stock market changes rapidly, investors
should not be sluggish in adjusting their open interest. Moreover, stock index is an indicator of the whole economy, and
PPI reflects the production cost of the economy directly; therefore, it should significantly affect stock index futures prices.
This inconsistency of empirical results and theoretical analysis may be due to omitted variables and the counter effect of
price adjustment.
The regression results in Table 4 are consistent with those of Chen et al. (2016), and we find that PPI announcements
do not affect stock index futures prices. The difference is, in Table 4, we only observe a significant impact from CPI
announcements on futures prices between six to nine minutes after the announcements, whereas, in the study of Chen
et al. (2016), they find that the effect is significant from ten minutes before to three minutes after the announcements.
Comparing these two studies, we see that the expansion of the sample size reduces the significance and turns formerly
significant estimates coefficients into insignificant ones. The difference between both studies lies in the sample period:
we use the sample period of January 2011 to November 2017, and Chen et al. (2016) use samples from January 2011 to
May 2014. To ascertain whether this difference leads to different results, we compare these two samples and find distinct
characteristics, which depend on the consistency of CPI and PPI news surprises.7 Among the additional observations in
Table 4, CPI and PPI news exhibit more opposite signs, as shown in Table 5, and this can contribute to the different results
mentioned above. When CPI and PPI forecasts are biased toward opposite directions, investors adjust open interest in

7 The consistency of CPI and PPI news surprises denotes whether the signs of S_CPIt and S_PPIt are the same.

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Table 6
Consistency of news surprise and the adjustment of stock index futures price in response to
macroeconomic announcements.
Consistent news surprise Inconsistent news surprise
k CPI PPI CPI PPI
−10 −0.2132 0.4743 0.0915 0.5182
(−0.2629) (0.6254) (0.2164) (1.1400)
−9 −0.1962 0.4563 0.0948 0.5284
(−0.2415) (0.6005) (0.2239) (1.1609)
−8 −0.1786 0.4505 0.0999 0.5338
(−0.2200) (0.5931) (0.2332) (1.1598)
−7 −0.1914 0.4427 0.0874 0.5286
(−0.2359) (0.5832) (0.2069) (1.1644)
−6 −0.1793 0.4486 0.0953 0.5360
(−0.2212) (0.5917) (0.2300) (1.2033)
−5 −0.1663 0.4483 0.0974 0.5520
(−0.2054) (0.5920) (0.2366) (1.2479)
−4 −0.1662 0.4275 0.0940 0.5379
(−0.2051) (0.5640) (0.2275) (1.2107)
−3 0.1069 0.2952 0.0852 0.5481
(0.1520) (0.4486) (0.2056) (1.2299)
−2 0.1192 0.2767 0.0943 0.5513
(0.1689) (0.4191) (0.2275) (1.2375)
−1 −0.1137 0.0057 0.0746 0.0510
(−1.6530) (0.0893) (1.2918) (0.8220)
0 −0.1036 0.0091 0.0651 0.0360
(−1.5977) (0.1495) (1.1317) (0.5827)
1 −0.1023 0.0036 0.0555 0.0708
(−1.4970) (0.0562) (1.0928) (1.2979)
2 −0.1092 0.0145 0.0601 0.0635
(−1.5558) (0.2208) (1.0389) (1.0222)
3 −0.1146** 0.0184 0.0555 0.0514
(−2.3701) (0.4073) (1.1690) (1.0072)
4 −0.1034** −0.0090 0.0264 0.0257
(−2.3720) (−0.2213) (0.6774) (0.6120)
5 −0.1033** 0.0141 0.0110 0.0072
(−2.1108) (0.3072) (0.2708) (0.1640)
6 −0.1339*** 0.0258 0.0134 −0.0021
(−2.8231) (0.5816) (0.4349) (−0.0642)
7 −0.1094*** 0.0303 0.0064 −0.0010
(−2.7432) (0.8130) (0.1854) (−0.0264)
8 −0.1182*** 0.0390 0.0038 0.0191
(−3.2345) (1.1401) (0.1026) (0.4840)
9 −0.1026*** 0.0352 0.0020 0.0046
(−3.3358) (1.2242) (0.0557) (0.1201)
10 −0.0668** 0.0177 0.0075 −0.0211
(−2.1367) (0.6038) (0.1920) (−0.5019)

This table reports the results of subsample regressions wherein we divide the whole sample into
two groups based on the consistency of CPI and PPI news surprises. Columns (1)–(2) present
the consistent group, and Columns (3)–(4) present the inconsistent group. All the subsample
regressions, wherein we investigate the impact of macroeconomic news announcements on stock
index futures prices at every minute from 10 min before macroeconomic news release to 10
min after, use Model (1): ∆pikt = αik + βik ∗ Sit + βjk ∗ Controljt + ξikt . Sit is the news surprise of
macroeconomic information i at time t, which is the mean standardized bias of macroeconomic
forecasts from the actual values, with i = CPI or PPI. T-statistics are reported in parentheses.
Coefficients marked with *, **, and *** are significant at the 10%, 5%, and 1% levels, respectively.

opposite ways, and the effects of these two kinds of macroeconomic announcements cancel each other. Thus, it may be
that the opposite CPI and PPI news surprises reduce or even eliminate the significance in the regression results, which
falsely shows that macroeconomic announcements do not have an impact on stock index futures prices. Accordingly, we
further explore whether CPI and PPI news surprises having the same sign can increase the significance of macroeconomic
announcements’ impact on stock index futures prices.
Table 6 reports the results of the subsample regressions wherein we divide the whole sample into two groups based
on the consistency of CPI and PPI news surprises. The results show that in the subsample in which CPI and PPI forecasts
are biased in the same direction, the time window for CPI announcements to be significantly effective in moving stock
index futures prices expands as compared to the baseline model, from six to nine minutes (see Table 4 Column 1) to
three to ten minutes after the announcements. Moreover, the estimated coefficients of the news surprise are significantly
negative, and the time points wherein the impact is significant are continuous, which is consistent with the theoretical
analysis. In the subsample wherein CPI and PPI forecasts are biased toward different directions, CPI announcements have
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Table 7
CPI: Institutional divergence and the adjustment of stock index futures prices in response to macroeconomic announcements.
Full sample Consistent news surprise Inconsistent news surprise
k S DH S*DH S DH S*DH S DH S*DH
−10 −0.8231 −0.5150 1.0582 −1.0047 −1.1622 1.4985 −0.8231 −0.5150 1.0582
(−1.1161) (−0.6455) (1.2207) (−0.9208) (−0.9314) (1.0983) (−1.1161) (−0.6455) (1.2207)
−9 −0.8223 −0.5154 1.0609 −0.9979 −1.1668 1.5176 −0.8223 −0.5154 1.0609
(−1.1131) (−0.6448) (1.2217) (−0.9133) (−0.9339) (1.1108) (−1.1131) (−0.6448) (1.2217)
−8 −0.8029 −0.4915 1.0478 −0.9763 −1.1370 1.5093 −0.8029 −0.4915 1.0478
(−1.0836) (−0.6131) (1.2030) (−0.8928) (−0.9094) (1.1040) (−1.0836) (−0.6131) (1.2030)
−7 −0.8374 −0.4941 1.0750 −1.0024 −1.1514 1.5345 −0.8374 −0.4941 1.0750
(−1.1352) (−0.6190) (1.2397) (−0.9184) (−0.9226) (1.1244) (−1.1352) (−0.6190) (1.2397)
−6 −0.8188 −0.4435 1.0634 −0.9647 −1.1212 1.4862 −0.8188 −0.4435 1.0634
(−1.1145) (−0.5580) (1.2314) (−0.8833) (−0.8978) (1.0883) (−1.1145) (−0.5580) (1.2314)
−5 −0.8565 −0.4018 1.1189 −0.9787 −1.1201 1.5365 −0.8565 −0.4018 1.1189
(−1.1700) (−0.5073) (1.3003) (−0.8984) (−0.8991) (1.1280) (−1.1700) (−0.5073) (1.3003)
−4 −0.8428 −0.4139 1.0966 −0.9701 −1.1519 1.5214 −0.8428 −0.4139 1.0966
(−1.1487) (−0.5213) (1.2713) (−0.8899) (−0.9241) (1.1161) (−1.1487) (−0.5213) (1.2713)
−3 −0.4415 −0.0777 0.6856 −0.4291 −0.5662 1.0102 −0.4415 −0.0777 0.6856
(−0.6632) (−0.1078) (0.8761) (−0.4455) (−0.5142) (0.8389) (−0.6632) (−0.1078) (0.8761)
−2 −0.4396 −0.0754 0.6902 −0.4138 −0.5617 1.0045 −0.4396 −0.0754 0.6902
(−0.6588) (−0.1045) (0.8800) (−0.4282) (−0.5083) (0.8314) (−0.6588) (−0.1045) (0.8800)
−1 −0.0576 0.0518 0.0551 −0.0928 0.0700 −0.0404 −0.0576 0.0518 0.0551
(−0.7637) (0.6353) (0.6222) (−0.9790) (0.6455) (−0.3406) (−0.7637) (0.6353) (0.6222)
0 −0.0476 0.0448 0.0465 −0.0848 0.0558 −0.0361 −0.0476 0.0448 0.0465
(−0.6587) (0.5733) (0.5471) (−0.9473) (0.5456) (−0.3227) (−0.6587) (0.5733) (0.5471)
1 −0.0746 0.0526 0.0630 −0.0969 0.0532 −0.0112 −0.0746 0.0526 0.0630
(−1.0485) (0.6839) (0.7535) (−1.0239) (0.4916) (−0.0948) (−1.0485) (0.6839) (0.7535)
2 −0.0718 0.0655 0.0652 −0.0722 0.0411 −0.0697 −0.0718 0.0655 0.0652
(−0.9516) (0.8014) (0.7352) (−0.7458) (0.3717) (−0.5762) (−0.9516) (0.8014) (0.7352)
3 −0.0680 0.0233 0.0587 −0.1073 0.0181 −0.0141 −0.0680 0.0233 0.0587
(−1.1728) (0.3715) (0.8614) (−1.5984) (0.2358) (−0.1675) (−1.1728) (0.3715) (0.8614)
4 −0.0897* 0.0072 0.0701 −0.0937 −0.0226 −0.0176 −0.0897* 0.0072 0.0701
(−1.8290) (0.1360) (1.2163) (−1.5500) (−0.3267) (−0.2329) (−1.8290) (0.1360) (1.2163)
5 −0.0621 0.0119 0.0352 −0.0744 0.0039 −0.0540 −0.0621 0.0119 0.0352
(−1.1724) (0.2076) (0.5656) (−1.0998) (0.0506) (−0.6389) (−1.1724) (0.2076) (0.5656)
6 −0.0841∗ −0.0414 0.0553 −0.1245* −0.0530 −0.0164 −0.0841* −0.0414 0.0553
(−1.7273) (−0.7847) (0.9653) (−1.9029) (−0.7086) (−0.2004) (−1.7273) (−0.7847) (0.9653)
7 −0.0685 −0.0369 0.0440 −0.0982* −0.0736 −0.0192 −0.0685 −0.0369 0.0440
(−1.5385) (−0.7656) (0.8404) (−1.8086) (−1.1854) (−0.2833) (−1.5385) (−0.7656) (0.8404)
8 −0.1279∗∗∗ −0.0427 0.1119** −0.1676*** −0.0607 0.0933 −0.1279*** −0.0427 0.1119**
(−3.0709) (−0.9487) (2.2849) (−3.4857) (−1.1032) (1.5522) (−3.0709) (−0.9487) (2.2849)
9 −0.0908∗∗ −0.0350 0.0729 −0.1337*** −0.0297 0.0586 −0.0908** −0.0350 0.0729
(−2.3676) (−0.8446) (1.6186) (−3.2081) (−0.6235) (1.1233) (−2.3676) (−0.8446) (1.6186)
10 −0.0417 −0.0622 0.0338 −0.0816* −0.0418 0.0285 −0.0417 −0.0622 0.0338
(−1.0321) (−1.4233) (0.7124) (−1.9087) (−0.8558) (0.5327) (−1.0321) (−1.4233) (0.7124)

This table estimates the effect of financial institutions’ forecast divergence on the impact of CPI announcements on stock index futures prices (i = CPI).
The regression uses Model (2): ∆pikt = αik + βik ∗ Sit + βjk ∗ Controljt + φik ∗ DiH + ηik ∗ DiH ∗ Sit + ξikt , tested at every minute from 10 min before
macroeconomic news release to 10 min after. Columns (1)–(3) use the full sample, Columns (4)–(6) use the consistent group, and Columns (7)–(9)
use the inconsistent group. Sit is the news surprise of macroeconomic information i at time t, which is the mean standardized bias of macroeconomic
forecasts from the actual values, with i = CPI. We must note whether the interaction of institutional divergence and news surprise (DiH ∗ Sit ) is
insignificant. T-statistics are reported in parentheses. Coefficients marked with *, **, and *** are significant at the 10%, 5%, and 1% levels, respectively.

no effect on stock index futures price. Consistent news surprise significantly increases the significance of the impact of CPI
announcements on stock index futures prices. PPI announcements have no impact on stock index futures prices, regardless
of the consistency of CPI and PPI news surprises. This indicates that investors choose a starting level of open interest based
on predicted CPI and PPI values, respectively, and make adjustments when noticing the difference between the expected
values and realized values. If the forecasted values of both price indexes are biased toward the same direction, investors
adjust their open interest in the same direction as well, which strengthens the impact of price index announcements
on stock index futures prices. Otherwise, the impact weakens. However, the regression results show that the discussion
above only applies to CPI announcements. Table 4 provides support regarding the CPI announcement in H2 but not for
PPI announcements.
Nevertheless, the result that consistent news surprise significantly increases the significance of the impact of CPI
announcements partly shows that PPI announcements do affect stock index futures prices. We cannot observe that impact
probably due to omitted variables, which we further investigate in the following discussions.
Tables 7 and 8 report the regression results of Model (2) using full sample and subsamples generated based on the
consistency of CPI and PPI news surprises. The result shows that regardless of using full sample or subsamples, the
interaction of institutional divergence and news surprise (DiH ∗ Sit ) is insignificant. Larger institutional divergence does
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G. Liu, X. Fang, Y. Huang et al. Economic Analysis and Policy 72 (2021) 87–101

Table 8
PPI: Institutional divergence and the adjustment of stock index futures price in response to macroeconomic announcements.
Full sample Consistent news surprise Inconsistent news surprise
k S DH S*DH S DH S*DH S DH S*DH
−10 0.6579 −0.7828 −0.2433 −0.9399 −0.1103 1.5734 1.8031* −1.4689 −1.5459
(0.6580) (−0.9319) (−0.2233) (−0.4613) (−0.0810) (0.7607) (1.9578) (−1.7045) (−1.5705)
−9 0.6724 −0.7952 −0.2614 −0.9488 −0.1234 1.5642 1.8254* −1.4785* −1.5605
(0.6716) (−0.9453) (−0.2395) (−0.4648) (−0.0904) (0.7548) (1.9820) (−1.7157) (−1.5853)
−8 0.6944 −0.8127 −0.2850 −0.9017 −0.1394 1.5067 1.8224* −1.4983* −1.5502
(0.6921) (−0.9641) (−0.2606) (−0.4416) (−0.1021) (0.7268) (1.9543) (−1.7172) (−1.5553)
−7 0.6701 −0.8053 −0.2621 −0.9224 −0.1410 1.5211 1.7971* −1.4826* −1.5258
(0.6702) (−0.9588) (−0.2405) (−0.4521) (−0.1033) (0.7344) (1.9539) (−1.7227) (−1.5521)
−6 0.7147 −0.7840 −0.3071 −0.8268 −0.1676 1.4235 1.8133* −1.4041 −1.5372
(0.7181) (−0.9377) (−0.2831) (−0.4054) (−0.1229) (0.6875) (2.0066) (−1.6606) (−1.5916)
−5 0.7782 −0.7806 −0.3686 −0.7808 −0.2115 1.3752 1.8898** −1.3436 −1.6110
(0.7841) (−0.9362) (−0.3407) (−0.3833) (−0.1552) (0.6649) (2.1090) (−1.6025) (−1.6822)
−4 0.7156 −0.7829 −0.3153 −0.8744 −0.2093 1.4557 1.8374* −1.3486 −1.5646
(0.7196) (−0.9371) (−0.2909) (−0.4291) (−0.1536) (0.7036) (2.0348) (−1.5961) (−1.6212)
−3 0.5284 −0.3961 −0.1329 −1.6888 0.4898 2.1646 1.8818** −1.3386 −1.6062
(0.5881) (−0.5247) (−0.1357) (−0.9671) (0.4194) (1.2210) (2.0805) (−1.5816) (−1.6614)
−2 0.5092 −0.3855 −0.1195 −1.7263 0.5121 2.1841 1.8734** −1.3394 −1.5922
(0.5653) (−0.5094) (−0.1218) (−0.9859) (0.4373) (1.2286) (2.0705) (−1.5821) (−1.6464)
−1 0.0272 −0.0283 −0.0577 0.2023 0.0860 −0.2234 0.0431 −0.1201 0.0106
(0.2673) (−0.3310) (−0.5207) (1.2051) (0.7659) (−1.3107) (0.3201) (−0.9520) (0.0738)
0 0.0423 −0.0220 −0.0772 0.1926 0.0891 −0.2092 0.0622 −0.1155 −0.0308
(0.4347) (−0.2693) (−0.7284) (1.2201) (0.8442) (−1.3052) (0.4625) (−0.9180) (−0.2141)
1 0.0677 0.0172 −0.0903 0.1103 0.0611 −0.1223 0.1553 0.0162 −0.1026
(0.7079) (0.2141) (−0.8657) (0.6454) (0.5344) (−0.7045) (1.3052) (0.1458) (−0.8071)
2 0.0497 0.0362 −0.0713 0.1299 0.0776 −0.1330 0.1197 0.0378 −0.0685
(0.4884) (0.4235) (−0.6427) (0.7430) (0.6634) (−0.7491) (0.8764) (0.2957) (−0.4691)
3 0.0078 −0.0294 −0.0222 0.1165 0.0581 −0.1125 0.0472 −0.0900 0.0059
(0.1000) (−0.4474) (−0.2598) (0.9731) (0.7253) (−0.9254) (0.4245) (−0.8651) (0.0494)
4 −0.0532 0.0208 0.0296 −0.0486 0.0766 0.0388 0.0279 −0.0079 −0.0027
(−0.7993) (0.3711) (0.4083) (−0.4472) (1.0536) (0.3511) (0.3006) (−0.0913) (−0.0270)
5 −0.0079 0.0272 −0.0176 0.0645 0.0575 −0.0597 0.0217 0.0197 −0.0178
(−0.1105) (0.4536) (−0.2268) (0.5262) (0.7021) (−0.4795) (0.2244) (0.2173) (−0.1722)
6 −0.0624 0.0068 0.0395 0.0152 0.0310 0.0096 −0.0261 0.0131 0.0290
(−0.9425) (0.1231) (0.5473) (0.1270) (0.3864) (0.0791) (−0.3571) (0.1907) (0.3708)
7 −0.0453 −0.0084 0.0344 0.0054 −0.0075 0.0281 −0.0129 0.0175 0.0144
(−0.7499) (−0.1649) (0.5234) (0.0535) (−0.1108) (0.2741) (−0.1567) (0.2269) (0.1626)
8 −0.0116 −0.0089 0.0121 −0.0130 −0.0332 0.0598 0.0629 0.0504 −0.0536
(−0.1975) (−0.1815) (0.1888) (−0.1421) (−0.5428) (0.6432) (0.7342) (0.6284) (−0.5853)
9 −0.0028 0.0187 −0.0064 −0.0083 0.0185 0.0470 0.0674 0.0439 −0.0766
(−0.0536) (0.4204) (−0.1115) (−0.1076) (0.3564) (0.5974) (0.8220) (0.5719) (−0.8740)
10 −0.0291 0.0118 0.0086 0.0129 −0.0109 0.0060 −0.0123 0.0543 −0.0111
(−0.5265) (0.2535) (0.1422) (0.1628) (−0.2049) (0.0746) (−0.1335) (0.6289) (−0.1129)

This table estimates the effect of financial institutions’ forecast divergence on the impact of PPI announcements on stock index futures prices (i = PPI).
The regression uses Model (2): ∆pikt = αik + βik ∗ Sit + βjk ∗ Controljt + φik ∗ DiH + etaik ∗ DiH ∗ Sit + ξikt . We look at the effect at every minute from
10 min before macroeconomic news release to 10 min after. Columns (1)–(3) use the full sample, Columns (4)–(6) use the consistent group, and
Columns (7)–(9) use the inconsistent group. Sit is news surprise of macroeconomic information i at time t, which is the mean standardized bias of
macroeconomic forecasts from the actual values, with i = PPI. We must note whether the interaction of institutional divergence and news surprise
(DiH ∗ Sit ) is insignificant. T-statistics are reported in parentheses. Coefficients marked with *, **, and *** are significant at the 10%, 5%, and 1% levels,
respectively.

not increase the significance of the impact of CPI and PPI announcements on stock index futures prices, and H3 is not
supported.
This result indicates that investors do not pay attention to financial institutions’ forecast divergence. Probably, they
place more value on the heterogeneity of financial institutions.

4.2. Institutional heterogeneity, macroeconomic news announcements, and stock index futures price index volatility

Forecast bias from different financial institutions can have heterogeneous effects on stock index futures prices.
Considering the institutional heterogeneity may improve our understanding of the impact of CPI and PPI announcements.
Next, we construct an unbalanced institution-month panel dataset and analyze the impact of forecast bias from different
institutions on stock index futures. Subsequently, we divide the full sample into subsamples based on forecast accuracy
and experience.
Table 9 reports the regression results of Model (3) with fixed effects. The results show that CPI announcements
significantly affect stock index futures prices between four to nine minutes after the release. Moreover, the estimated
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Table 9
Institutional heterogeneity and the adjustment of stock index futures price in response to macroeconomic announcements.
k −10 −9 −8 −7 −6 −5 −4 −3 −2 −1
CPI −0.2632 −0.2505 −0.2114 −0.2762 −0.2599 −0.2770 −0.2872 0.0593 0.0665 0.0265
(−1.3023) (−1.2358) (−1.0433) (−1.3605) (−1.2914) (−1.3777) (−1.4181) (0.2881) (0.3200) (0.7142)
PPI −0.0322*** −0.0314** −0.0319** −0.0323*** −0.0319** −0.0317*** −0.0323** −0.0347*** −0.0331*** −0.0062**
(−2.6340) (−2.5701) (−2.6283) (−2.6745) (−2.6232) (−2.6856) (−2.6254) (−3.3716) (−3.3316) (−2.4173)
0 1 2 3 4 5 6 7 8 9 10
0.0266 −0.0133 −0.0142 −0.0003 −0.0522* −0.0994*** −0.1006*** −0.0866*** −0.1029*** −0.0615*** 0.0241*
(0.7397) (−0.3523) (−0.4001) (−0.0104) (−1.9044) (−3.5446) (−3.9365) (−3.7417) (−4.7863) (−3.1967) (1.8328)
−0.0057** −0.0077*** −0.0093*** −0.0107*** −0.0107*** −0.0052** −0.0034* −0.0002 −0.0012 −0.0046* −0.0047*
(−2.3478) (−3.2061) (−3.1900) (−3.3764) (−3.2364) (−2.2826) (−1.7749) (−0.1512) (−0.8175) (−1.6808) (−1.9549)

This table estimates the effect of the impact of macroeconomic announcements on stock index futures price while considering the institutional
heterogeneity. We construct an unbalanced institution-month panel dataset and analyze the impact of forecast bias from different institutions on
stock index futures. The regressions use Model (3): δ pikt = αik + βik ∗ Simt + βjk ∗ Controljmt + ξimt , with fixed effects. We run the model at every
minute from 10 min before macroeconomic news release to 10 min after, using the full sample. Simt is forecast bias from different institutions, which
measures the extent to which each financial institution’s forecast value deviates from the realized value. T-statistics are reported in parentheses.
Coefficients marked with *, **, and *** are significant at the 10%, 5%, and 1% levels, respectively.

coefficients of the institutional forecast bias are significantly negative, and the time points wherein the impact is significant
are continuous, which is consistent with the theoretical analysis. PPI announcements significantly affect stock index
futures prices from 10 min before to 10 min after the release, with the estimated coefficients of the institutional forecast
bias and time points of significant impact being significantly negative and continuous, respectively. When considering the
institutional heterogeneity, the significance of the effect of macroeconomic announcements on stock index futures prices
becomes magnified, especially in the case of PPI. This result improves Table 4, supplements research by Cheng and Zhou
(2013) and Chen et al. (2016), and firmly documents the theoretical analysis that both CPI and PPI announcements affect
stock index futures prices.
To explore what kinds of institutional heterogeneous characteristics are more valued by investors, we examine two
aspects—forecast accuracy and experience.
Table 10 reports the regression results of Model (3) with fixed effect using subsamples of high and low forecast
accuracy. The results show that in the high-accuracy group, CPI announcements significantly affect stock index futures
prices from ten minutes before to nine minutes after the release, with the estimated coefficients of the institutional
forecast bias being significantly negative and continuous time points wherein the impact is significant. In the low-accuracy
group, CPI announcements significantly affect stock index futures prices from one minute before to four minutes after
the release. However, the estimated coefficients of the institutional forecast bias are non-negative. Regarding PPI, in the
high-accuracy group, PPI announcements significantly affect stock index futures prices from ten minutes before to eight
minutes after the release, with the estimated coefficients of the institutional forecast bias being significantly negative and
continuous time points wherein the impact is significant. In the low-accuracy group, PPI announcements do not affect
stock index futures prices. Thus, we observe a higher significance of the estimated coefficients of institutional forecast bias
in the high-accuracy group as compared to the low-accuracy group and the full sample. This indicates that investors tend
to trust financial institutions that provide more accurate macroeconomic forecasts more frequently in the past year and
make investment decisions based on the information these institutions offer. Thus, forecast bias from financial institutions
with higher forecast accuracy has a bigger impact on stock index futures prices when macroeconomic announcements
occur. The results in Table 10 support H4a.
Table 11 reports the regression results of Model (3) with fixed effect using subsamples of high and low macroeconomic
forecasting frequency. The results show that in the high-frequency group, CPI announcements significantly affect stock
index futures prices between five minutes to ten minutes after the release, with the estimated coefficients of the
institutional forecast bias being significantly negative and continuous time points wherein the impact is significant. In
the low-frequency group, CPI announcements do not affect stock index futures prices. For PPI, in the high-frequency
group, PPI announcements significantly affect stock index futures prices from ten minutes before to ten minutes after the
release, and the estimated coefficients of the institutional forecast bias are significantly negative. In the low-frequency
group, PPI announcements do not affect stock index futures price. Overall, the significance of the estimated coefficients
of institutional forecast bias is higher in the high-frequency group than in the low-frequency group and the full sample.
This indicates that investors tend to trust financial institutions that are more experienced in macroeconomic forecasts.
Thus, forecast bias from more experienced financial institutions has a stronger impact on stock index futures prices when
macroeconomic announcements occur. The results in Table 11 support H4b.

4.3. Robustness checks

First, considering that the settings of models can influence the results, we use a random effect model and re-examine
the impact of institutional heterogeneity and macroeconomic announcements on stock index futures price volatility.
Tables 12, 13, and 14 in Appendix 1 show the results. The results are robust with the random effect model.
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Table 10
Forecast accuracy, institutional heterogeneity, and the adjustment of stock index futures price in response
to macroeconomic announcements.
CPI PPI
k High-accuracy Low-accuracy High-accuracy Low-accuracy
−10 −0.4413** 0.2072 −0.0712** −0.0410
(−2.6127) (0.6053) (−2.3549) (−1.4011)
−9 −0.4034** 0.2128 −0.0698** −0.0413
(−2.4864) (0.6209) (−2.3613) (−1.4143)
−8 −0.3867** 0.2647 −0.0698** −0.0421
(−2.4095) (0.7718) (−2.3590) (−1.4439)
−7 −0.4407** 0.1939 −0.0702** −0.0414
(−2.6268) (0.5660) (−2.3688) (−1.4291)
−6 −0.3689** 0.1559 −0.0685** −0.0439
(−2.3179) (0.4547) (−2.3371) (−1.4977)
−5 −0.3227** 0.0750 −0.0664** −0.0444
(−2.0631) (0.2178) (−2.3412) (−1.5269)
−4 −0.3425** 0.0845 −0.0700** −0.0429
(−2.1293) (0.2461) (−2.4033) (−1.4542)
−3 −0.3698** 0.5142 −0.0678∗∗∗ −0.0352
(−2.2861) (1.5491) (−2.7133) (−1.2431)
−2 −0.4017** 0.5473 −0.0649∗∗∗ −0.0349
(−2.4901) (1.6355) (−2.7242) (−1.2503)
−1 −0.2711*** 0.3146*** −0.0131** −0.0010
(−2.7637) (8.7873) (−2.3829) (−0.0831)
0 −0.2432*** 0.2928*** −0.0118** −0.0018
(−2.6922) (8.1878) (−2.4752) (−0.1558)
1 −0.2072** 0.1995*** −0.0122** −0.0004
(−2.2677) (5.6998) (−2.0075) (−0.0400)
2 −0.1496* 0.1484*** −0.0138* −0.0012
(−1.9515) (4.0037) (−1.7866) (−0.1059)
3 −0.2285*** 0.2065*** −0.0183** −0.0021
(−3.2316) (7.7729) (−2.1810) (−0.1626)
4 −0.1976*** 0.0764*** −0.0128* −0.0041
(−2.7444) (2.7527) (−1.9072) (−0.3037)
5 −0.1753*** −0.0277 −0.0030 0.0032
(−2.6563) (−0.8920) (−0.8924) (0.3165)
6 −0.1847*** −0.0146 −0.0007 0.0078
(−2.7999) (−0.6237) (−0.3125) (0.8643)
7 −0.1390** −0.0306 0.0047*** 0.0050
(−2.3950) (−1.3943) (2.9440) (0.8578)
8 −0.1942*** −0.0401 0.0037** 0.0019
(−3.1853) (−1.4772) (2.6017) (0.2693)
9 −0.1236** −0.0147 0.0011 −0.0016
(−2.3180) (−0.6164) (0.4586) (−0.1345)
10 −0.0070 0.0461** −0.0005 −0.0029
(−0.1886) (2.2602) (−0.2008) (−0.2517)

This table estimates whether the forecast bias from the financial institutions with higher forecast
accuracy has a bigger impact on stock index futures prices when macroeconomic announcements
occur. First, we divide the whole unbalanced institution-month panel dataset into two groups based
on financial institutions’ forecast accuracy. The bottom half of the observations with lower FEimt (FEimt =
1
∑t −1
12 k=t −12 |Simk |) constitutes the high-accuracy group. The other half constitutes the low-accuracy group.
Subsequently, we run regressions to estimate Model (3): δ pikt = αik + βik ∗ Simt + βjk ∗ Controljmt + ξimt ,
with fixed effects, at every minute from 10 min before macroeconomic news release to 10 min after,
using subsamples of high and low forecast accuracy. Simt is forecast bias from different institutions,
which measures the extent to which each financial institution’s forecast value deviates from the realized
value. Columns (1) and (3) use the high forecast accuracy group, and Columns (2) and (4) use the low
forecast accuracy group. T-statistics are reported in parentheses. Coefficients marked with *, **, and ***
are significant at the 10%, 5%, and 1% levels, respectively.

Second, as most of the macroeconomic announcements occur at 9:30 am, and only six times at 10:30 am and once at
1:30 pm, the timing of the information release may also affect regression results. To address this concern, we preserve
the observations with announcement time as 9:30 am and re-investigate the results in Tables 9 and 10, and Table 11.
Tables 15, 16, and 17 in Appendix 2 present the relevant results. Notably, our results remain robust.8

8 Owing to space constraints, we have included the results of the robustness test as an appendix in the supplementary material.

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Table 11
Forecast frequency, institutional heterogeneity, and the adjustment of stock index futures prices in
response to macroeconomic announcements.
CPI PPI
k High-frequency Low-frequency High-frequency Low-frequency
−10 −0.2262 −0.7333 −0.0340** −0.6984
(−1.0575) (−1.2272) (−2.1614) (−1.1783)
−9 −0.2153 −0.0262 −0.0326** −0.0268
(−1.0030) (−1.2739) (−2.1111) (−1.2761)
−8 −0.1730 −0.7333 −0.0331** −0.6984
(−0.8060) (−1.2272) (−2.1411) (−1.1783)
−7 −0.2391 −0.0262 −0.0337** −0.0268
(−1.1128) (−1.2739) (−2.1611) (−1.2761)
−6 −0.2279 −0.7333 −0.0333** −0.6984
(−1.0691) (−1.2272) (−2.1480) (−1.1783)
−5 −0.2496 −0.0262 −0.0329** −0.0268
(−1.1724) (−1.2739) (−2.1977) (−1.2761)
−4 −0.2585 −0.7333 −0.0339** −0.6984
(−1.2054) (−1.2272) (−2.1662) (−1.1783)
−3 0.1185 −0.0262 −0.0365*** −0.0268
(0.5429) (−1.2739) (−2.9368) (−1.2761)
−2 0.1254 −0.7333 −0.0344*** −0.6984
(0.5683) (−1.2272) (−2.9210) (−1.1783)
−1 0.0463 −0.0262 −0.0081** −0.0268
(1.3078) (−1.2739) (−2.0576) (−1.2761)
0 0.0450 −0.7333 −0.0074* −0.6984
(1.3169) (−1.2272) (−1.9983) (−1.1783)
1 0.0019 −0.0262 −0.0103** −0.0268
(0.0508) (−1.2739) (−2.4619) (−1.2761)
2 −0.0034 −0.7333 −0.0124** −0.6984
(−0.0946) (−1.2272) (−2.4797) (−1.1783)
3 0.0149 −0.0262 −0.0145** −0.0268
(0.5691) (−1.2739) (−2.6728) (−1.2761)
4 −0.0413 −0.7333 −0.0146** −0.6984
(−1.5501) (−1.2272) (−2.6381) (−1.1783)
5 −0.0928*** −0.0262 −0.0072** −0.0268
(−3.3380) (−1.2739) (−2.1798) (−1.2761)
6 −0.0928*** −0.7333 −0.0045** −0.6984
(−3.7165) (−1.2272) (−2.0307) (−1.1783)
7 −0.0798*** −0.0262 −0.0004 −0.0268
(−3.4730) (−1.2739) (−0.3046) (−1.2761)
8 −0.0933*** −0.7333 −0.0016 −0.6984
(−4.4394) (−1.2272) (−1.0156) (−1.1783)
9 −0.0527*** −0.0262 −0.0057* −0.0268
(−2.7724) (−1.2739) (−1.6806) (−1.2761)
10 0.0292** −0.7333 −0.0061* −0.6984
(2.2297) (−1.2272) (−1.8956) (−1.1783)

This table estimates whether the forecast bias from the more experienced financial institutions has a
bigger impact on stock index futures prices when macroeconomic announcements occur. First, we divide
the whole unbalanced institution-month panel dataset into two groups based on financial institutions’
recorded forecast frequency. We assign the top 50% of observations with higher forecast frequency to the
high-frequency group—these institutions are more experienced in macroeconomic forecasting—and the
bottom 50% less experienced institutions to the low-frequency group. Subsequently, we run regressions
to estimate Model (3): δ pikt = αik + βik ∗ Simt + βjk ∗ Controljmt + ξimt , with fixed effects, at every minute
from 10 min before macroeconomic news release to 10 min after, using subsamples of high and low
forecast accuracy. Simt is forecast bias from different institutions, which measures the extent to which
each financial institution’s forecast value deviates from the realized value. Columns (1) and (3) use the
high macroeconomic forecasting frequency group, and Columns (2) and (4) use the low macroeconomic
forecasting frequency groups. T-statistics are reported in parentheses. Coefficients marked with *, **, and
*** are significant at the 10%, 5%, and 1% levels, respectively.

5. Conclusions and further discussions

Using the intraday data of the CSI 300 stock index futures price and Chinese macroeconomic news announcements,
our study explores the impact of macroeconomic news announcements on the price of stock index futures and the
corresponding mechanism. Our empirical results show that institutional forecast bias has a more significant impact on the
price of stock index futures when controlling for the fixed effect of financial institutions. Through this fruitful research,
we have extended the literature on the impact of macroeconomic announcements on the price of the stock index futures
at the institutional level and documented that the heterogeneity of financial institutions plays an important role in this
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impact. Regarding the inconsistent and often contradictory conclusions of former studies, we propose that this may be
because the news surprise can be of opposite signs, which may impair the impact of the macroeconomic announcements
on stock index futures prices. On separating the full sample into two subsamples based on the sign of the news surprises
of PPI and CPI announcements, we find that CPI announcements have a significant impact on stock index futures price.
The policy implications of our study are as follows. First, the stock index futures market can be used to prevent
and resolve systemic financial risks. According to our analysis, stock index futures prices respond to macroeconomic
information promptly, which makes futures a valid tool to hedge against systemic financial risks. Second, improving
the effectiveness of the forward guidance of macroeconomic policies requires further development of the stock index
futures market. The key point of doing so is to cultivate more financial institutions with strong forecasting capabilities
and rich forecasting experience. According to our conclusions, macroeconomic information can pass through to the market
more efficiently through financial institutions with stronger forecasting abilities and richer experience in the industry. If
the stock index futures market has such efficient financial institutions, it would certainly help the government manage
expectations and improve the transmission efficiency of forward guidance.
This study contributes to the literature in the following ways. First, we extend the research of the impact of
macroeconomic announcements on the price of the stock index futures to the institutional level and reveal the underlying
mechanism. This shows us that it is crucial to pay attention to the micro foundation of the macroeconomy both in
economy management and economic research. Second, the development of financial institutions plays an important role in
improving the financial markets. Macroeconomic information is transmitted to the markets through financial institutions.
Their characteristics, such as analyzing and forecasting ability, and experience in the industry determine whether the
transmission is smooth and clear.
Further, the impact of macroeconomic announcements on other sub-financial markets can be examined by using a
similar method, and we plan to continue our research accordingly.

Acknowledgments

This work is funded by the project of ‘‘Research on the Theory Mechanism and Policy of Expectation Management to
Improve the Effectiveness of Chinese Monetary Policy’’ (Youth Project of National Natural Science Foundation of China, No.
71703179). And it is also sponsored by ‘‘Chenguang Program’’ supported by Shanghai Education Development Foundation
and Shanghai Municipal Education Commission (17CG62) and ‘‘Shanghai University Young Teacher Training Funding
Program’’ (ZZLX19034).

Appendix A. Supplementary data

Supplementary material related to this article can be found online at https://doi.org/10.1016/j.eap.2021.07.009.

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