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Risk–return relationships in foreign‐currency futures following macroeconomic announcements

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  • Li‐Ming Han
  • Onem Ozocak

Abstract

This study uses the tick data for foreign‐currency futures to examine risk–return relationships on macroeconomic announcements. This study—different from previous studies—examines the risk–return relationship by capturing the announcement effect on returns with announcement surprises and on volatilities with announcement dummies simultaneously in a Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model. Strong risk–return relationships are detected for the first min after the announcements. Furthermore, the return–risk tradeoff ratios differ across currencies and across macroeconomic indicators. The same information can be more profitable when acted on the more liquid currency futures. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22: 729–764, 2002

Suggested Citation

  • Li‐Ming Han & Onem Ozocak, 2002. "Risk–return relationships in foreign‐currency futures following macroeconomic announcements," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 22(8), pages 729-764, August.
    • Handle: RePEc:wly:jfutmk:v:22:y:2002:i:8:p:729-764
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    Cited by:

    1. Sanjay Sehgal & Wasim Ahmad & Florent Deisting, 2015. "An investigation of price discovery and volatility spillovers in India’s foreign exchange market," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 42(2), pages 261-284, May.
    2. 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.
    3. Kumar, Satish, 2018. "Price discovery in emerging currency markets," Research in International Business and Finance, Elsevier, vol. 46(C), pages 528-536.
    4. Lee A. Smales, 2013. "Impact Of Macroeconomic Announcements On Interest Rate Futures: High-Frequency Evidence From Australia," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 36(3), pages 371-388, September.

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