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Dynamic News Effects in High Frequency Euro Exchange Rate Returns and Volatility

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Author Info
Evans, Kevin () (Cardiff Business School)
Speight, Alan
Abstract

Investigation of the dynamic, short-run response of exchange rate returns to the information surprise of macroeconomic announcements reveals that US macroeconomic news generates far more dramatic responses in exchange rate returns and returns volatility than news on the macroeconomic performance of other countries. Eurozone, German, French and Japanese news have very little impact. However, some UK announcements are important for the EUR-GBP rate. The reaction of exchange rate returns to news is very quick and occurs within the first five minutes of the release with very little reaction in the following fifteen minutes, thus enabling us to characterise such reactions as conditional mean return jumps. These jumps show that exchange rates are strongly linked to fundamentals in the five-minute intervals immediately following the data release. Interestingly, despite causing large responses in returns volatility, the large jumps in returns following interest rate decisions do not appear to be correlated with the informational innovation surrounding their announcement.

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Publisher Info
Paper provided by Cardiff University, Cardiff Business School, Accounting and Finance Section in its series Cardiff Accounting and Finance Working Papers with number A2006/4.

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Length: 37 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:cdf:accfin:2006/4

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Related research
Keywords: Intraday volatility; macroeconomic announcements; exchange rates;

Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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