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Intraday periodicity, calendar and announcement effects in Euro exchange rate volatility

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  • Evans, Kevin P.
  • Speight, Alan E.H.
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    Abstract

    This paper provides an analysis of intraday volatility using 5-min returns for Euro-Dollar, Euro-Sterling and Euro-Yen exchange rates, and therefore a new market setting. This includes a comparison of the performance of the Fourier flexible form (FFF) intraday volatility filter with an alternative cubic spline approach in the modelling of high frequency exchange rate volatility. Analysis of various potential calendar effects and seasonal chronological changes reveals that although such effects cause deviations from the average intraday volatility pattern, these intraday timing effects are in many cases only marginally statistically significant and are insignificant in economic terms. Results for the cubic spline approach imply that significant macroeconomic announcement effects are larger and far more quickly absorbed into exchange rates than is suggested by the FFF model, and underscores the advantage of the cubic spline in permitting the periodicity in intraday volatility to be more closely identified. Further analysis of macroeconomic announcement effects on volatility by country of origin (including the US, Eurozone, UK, Germany, France and Japan) reveals that the predominant reactions occur in response to US macroeconomic news, but that Eurozone, German and UK announcements also cause significant volatility reactions. Furthermore, Eurozone announcements are found to impact significantly upon volatility in the pre-announcement period.

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    Bibliographic Info

    Article provided by Elsevier in its journal Research in International Business and Finance.

    Volume (Year): 24 (2010)
    Issue (Month): 1 (January)
    Pages: 82-101

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    Handle: RePEc:eee:riibaf:v:24:y:2010:i:1:p:82-101

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    Web page: http://www.elsevier.com/locate/ribaf

    Related research

    Keywords: Exchange rates Intraday volatility Calendar effects Macroeconomic announcements;

    References

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    Cited by:
    1. Vortelinos, Dimitrios I., 2013. "Portfolio analysis of intraday covariance matrix in the Greek equity market," Research in International Business and Finance, Elsevier, vol. 27(1), pages 66-79.
    2. Haniff, Mohd Nizal & Pok, Wee Ching, 2010. "Intraday volatility and periodicity in the Malaysian stock returns," Research in International Business and Finance, Elsevier, vol. 24(3), pages 329-343, September.

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