Abstract
We study the effects of liquidity and term‐to‐maturity following macroeconomic news announcements. To do this we select five instruments that differ in liquidity, or term‐to‐maturity, or both, and examine their response to the release of macroeconomic news. The results from this study suggest that variance on announcement days is higher in more liquid, longer term‐to‐maturity instruments. When instruments differ in both term‐to‐maturity and liquidity, term‐to‐maturity effects dominate. Tests for persistence in higher volatility in the five instruments following news releases show that most of the effects of the announcements seem to be well absorbed within fifteen minutes of the announcements. However, the evidence also suggests that the effects persist for longer periods in instruments that are more liquid. Term‐to‐maturity appears to have little or no effect in this instance.