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Foreign exchange futures volatility: Day‐of‐the‐week, intraday, and maturity patterns in the presence of macroeconomic announcements

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  • Li‐Ming Han
  • John L. Kling
  • Clifford W. Sell

Abstract

Using standard deviations and numbers of price changes calculated from tick data for currency futures, this study finds strong day‐of‐the‐week effects for both the Deutsche mark and Japanese yen, mild effects for the British pound, and no effects for the Canadian dollar after controlling for scheduled macroeconomic announcements and days to contract expiration. The day‐of‐the‐week effects are found to be caused either by Mondays’ low volatility, or by Thursdays’ or Fridays’ high volatility. This result suggests that the day‐of‐the‐week effects in the currency futures are not driven by the announcements of macroeconomic indicators as proposed in previous studies, but rather by other factors, such as private information‐based trading or by market microstructure. This study also finds that the announcements are processed equally across the days of the week for all four currency futures. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 665–693, 1999

Suggested Citation

  • Li‐Ming Han & John L. Kling & Clifford W. Sell, 1999. "Foreign exchange futures volatility: Day‐of‐the‐week, intraday, and maturity patterns in the presence of macroeconomic announcements," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 19(6), pages 665-693, September.
    • Handle: RePEc:wly:jfutmk:v:19:y:1999:i:6:p:665-693
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    Cited by:

    1. Deniz Erdemlioglu & Sébastien Laurent & Christopher J. Neely, 2013. "Econometric modeling of exchange rate volatility and jumps," Chapters, in: Adrian R. Bell & Chris Brooks & Marcel Prokopczuk (ed.), Handbook of Research Methods and Applications in Empirical Finance, chapter 16, pages 373-427, Edward Elgar Publishing.
    2. Gau, Yin-Feng & Hua, Mingshu, 2007. "Intraday exchange rate volatility: ARCH, news and seasonality effects," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(1), pages 135-158, March.
    3. Kenneth Yung & Yen-Chih Liu, 2009. "Implications of futures trading volume: Hedgers versus speculators," Journal of Asset Management, Palgrave Macmillan, vol. 10(5), pages 318-337, December.
    4. Hua, Mingshu & Gau, Yin-Feng, 2006. "Determinants of periodic volatility of intraday exchange rates in the Taipei FX Market," Pacific-Basin Finance Journal, Elsevier, vol. 14(2), pages 193-208, April.
    5. Chen, Kim Heng & Han, Li-Ming, 2006. "Efficiency in Information Processing: A Study of Non-Nearby Currency Futures and Relationships with Nearby Counterparts," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 2(1), pages 1-29.
    6. Kim, Minho & Kim, Minchoul, 2003. "Implied volatility dynamics in the foreign exchange markets," Journal of International Money and Finance, Elsevier, vol. 22(4), pages 511-528, August.
    7. Smales, Lee A., 2015. "Asymmetric volatility response to news sentiment in gold futures," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 34(C), pages 161-172.
    8. Nippani, Srinivas & Pennathur, Anita K., 2004. "Day-of-the-week effects in commercial paper yield rates," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(4), pages 508-520, September.

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