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09/11 on the USD/EUR foreign exchange market

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  • Alexander Mende

Abstract

We study the relationship between foreign exchange trading activity at a small bank in Germany and volatility on the USD/EUR foreign exchange market around the events of 09/11/2001. We find that volatility and bid-ask spreads are by far larger at that time, but the shock is not persistent. The positive correlation between volume and volatility does not break up, but intensifies strongly indicating the arrival of new information and increased price risk. We conclude that the USD/EUR foreign exchange market maintains its liquid structure and its efficient processing of exogenous shocks.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 16 (2006)
Issue (Month): 3 ()
Pages: 213-222

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Handle: RePEc:taf:apfiec:v:16:y:2006:i:3:p:213-222

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References

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Cited by:
  1. Khemraj, Tarron & Pasha, Sukrishnalall, 2008. "Foreign exchange market bid-ask spread and market power in an underdeveloped economy," MPRA Paper 11422, University Library of Munich, Germany.
  2. Mende, Alexander & Menkhoff, Lukas, 2006. "Profits and Speculation in Intra-Day Foreign Exchange Trading," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-339, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  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. Carol Osler & Alexander Mende & Lukas Menkhoff, 2010. "Price Discovery in Currency Markets," Working Papers 03, Brandeis University, Department of Economics and International Businesss School.
  5. Bos J.W.B. & Frömmel M. & Lamers M.A.J., 2013. "FDI, terrorism and the availability heuristic for U.S. investors before and after 9/11," Research Memorandum 047, Maastricht University, Graduate School of Business and Economics (GSBE).

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