The response of individual FX dealers'quoting activity to macroeconomic news announcements
AbstractThis paper analyses the effect of nine categories of news announcements on the quoting activity of individual FX dealers on the Euro/Dollar exchange rate from May to October 2001. We use the Double Autoregressive Conditional Poisson model (DACP), which is designed for time series of count data, which can be both under- or overdispersed. We find that dealers' quoting activity reacts differently to the same announcements, some increasing their activity, whist others decrease it in response to the same news. We attribute this to the heterogeneous interpretation of the news content by individual traders. This means that studies of quoting activity at the aggregate level can miss the point. Finally, we identify the news announcements that impact quoting activity as non-common knowledge news.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2003070.
Date of creation: 00 Oct 2003
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foreign exchange; market microstructure; time series; count data;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
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