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Informational linkages across trading regions: Evidence from foreign exchange markets

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  • Cai, Fang
  • Howorka, Edward
  • Wongswan, Jon

Abstract

Using a new high-frequency data set from Electronic Broking Services (EBS), this paper examines informational linkages in the euro-dollar and dollar-yen exchange rates across five trading regions: Asia Pacific, the Asia-Europe overlap, Europe, the Europe-America overlap, and America. Information is proxied by exchange rate return, direction of return, volatility, trading activity, and order flow. We find that informational linkages are statistically significant at both own-region and inter-region levels, but own-region spillovers dominate in economic significance, especially for volatility and trading activity. In addition, order flow spillovers from the Europe-America overlap trading region are the most important source of spillovers to other trading regions for both currency pairs.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 27 (2008)
Issue (Month): 8 (December)
Pages: 1215-1243

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Handle: RePEc:eee:jimfin:v:27:y:2008:i:8:p:1215-1243

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Web page: http://www.elsevier.com/locate/inca/30443

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Keywords: Exchange rate Volatility Trading activity Trading volume Order flow High-frequency data;

References

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Citations

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Cited by:
  1. Kentaro Iwatsubo & Yoshihiro Kitamura, 2008. "Intraday Evidence of the Informational Efficiency of the Yen/Dollar Exchange Rate," Discussion Papers 0801, Graduate School of Economics, Kobe University.
  2. Vít Bubák & Evžen Kocenda & Filip Zikes, 2010. "Volatility Transmission in Emerging European Foreign Exchange Markets," CESifo Working Paper Series 3063, CESifo Group Munich.
  3. Michael King & Carol Osler & Dagfinn Rime, 2012. "The Market Microstructure Approach to Foreign Exchange: Looking Back and Looking Forward," Working Papers 54, Brandeis University, Department of Economics and International Businesss School.
  4. Galagedera, Don U.A. & Kitamura, Yoshihiro, 2012. "Effect of exchange rate return on volatility spill-over across trading regions," Japan and the World Economy, Elsevier, vol. 24(4), pages 254-265.
  5. Fischer, Andreas M & Ranaldo, Angelo, 2008. "Does FOMC News Increase Global FX Trading?," CEPR Discussion Papers 6753, C.E.P.R. Discussion Papers.
  6. Vithessonthi, Chaiporn, 2014. "Monetary policy and the first- and second-moment exchange rate change during the global financial crisis: Evidence from Thailand," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 170-194.
  7. Kühl, Michael, 2009. "Excess comovements between the Euro/US dollar and British pound/US dollar exchange rates," Center for European, Governance and Economic Development Research Discussion Papers 89, University of Goettingen, Department of Economics.

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