ABSTRACT
In this chapter, the announcement effects of economic variables on interest rate futures prices on the Sydney Futures Exchange (ninety-day bank accepted bills) will be investigated. We shall be concerned with the abnormal return on the day of the announcement of the money supply, the inflation rate and the balance of payments. The null hypothesis to be tested here is that the expected rate of return to the interest rate futures contract should be equal to zero if there is no abnormal market performance. Two similar methods will be used based on the daily rates of return of the interest rate futures contract. The first is the cumulative average abnormal returns (CAAR) approach which was introduced by Ball and Brown (1968) and Fama et al. (1969) 1 without statistical tests. The second approach is that of Patell, Dodd and Warner which is based on the cumulative abnormal returns method, where the abnormal returns are standardized by their estimated standard deviations. The latter method was developed by Patell (1976: 256), improved by Dodd (1980: 111–21) and published by Dodd and Warner (1983: 436–7).
