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Trading Activity and Macroeconomic Announcements in High-Frequency Exchange Rate Data

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Author Info

  • Alain P. Chaboud
  • Sergey V. Chernenko
  • Jonathan H. Wright

Abstract

This article introduces a new high-frequency data set that includes global trading volume and prices over five years in the spot euro-dollar and dollar-yen currency pairs. Studying the effects of US macroeconomic data releases, we show that spikes in trading volume tend to occur even when announcements are in line with market expectations, in sharp contrast to the price response. There is some evidence that the volume after announcements is negatively related to the ex ante dispersion of market expectations, contrary to the standard theoretical prediction. At very high frequency, we find evidence that much of the immediate jump in prices in reaction to an announcement occurs before the surge in volume. (JEL: F31, G14) (c) 2008 by the European Economic Association.

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Bibliographic Info

Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 6 (2008)
Issue (Month): 2-3 (04-05)
Pages: 589-596

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Handle: RePEc:tpr:jeurec:v:6:y:2008:i:2-3:p:589-596

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Cited by:
  1. Chaboud, Alain P. & Chiquoine, Benjamin & Hjalmarsson, Erik & Loretan, Mico, 2010. "Frequency of observation and the estimation of integrated volatility in deep and liquid financial markets," Journal of Empirical Finance, Elsevier, vol. 17(2), pages 212-240, March.
  2. Andreas M. Fischer & Angelo Ranaldo, 2008. "Does FOMC News Increase Global FX Trading?," Working Papers 2008-09, Swiss National Bank.
  3. Ben Omrane, Walid & Heinen, Andréas, 2010. "Public news announcements and quoting activity in the Euro/Dollar foreign exchange market," Computational Statistics & Data Analysis, Elsevier, vol. 54(11), pages 2419-2431, November.
  4. Domenico Ferraro & Kenneth S. Rogoff & Barbara Rossi, 2012. "Can Oil Prices Forecast Exchange Rates?," NBER Working Papers 17998, National Bureau of Economic Research, Inc.
  5. Gençay, Ramazan & Gradojevic, Nikola, 2013. "Private information and its origins in an electronic foreign exchange market," Economic Modelling, Elsevier, vol. 33(C), pages 86-93.
  6. Rosa, Carlo, 2013. "The financial market effect of FOMC minutes," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 67-81.

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