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Asymmetric News Effects on Volatility: Good vs. Bad News in Good vs. Bad Times

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Author Info
Laakkonen, Helinä
Lanne, Markku

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Abstract

We study the impact of positive and negative macroeconomic US and European news announcements in different phases of the business cycle on the highfrequency volatility of the EUR/USD exchange rate. The results suggest that in general bad news increases volatility more than good news. The news effects also depend on the state of the economy: bad news increases volatility more in good times than in bad times, while there is no difference between the volatility effects of good news in bad and good times.

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File URL: http://mpra.ub.uni-muenchen.de/8296/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8296.

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Date of creation: 2008
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Handle: RePEc:pra:mprapa:8296

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Related research
Keywords: Volatility News Nonlinearity Smooth Transition Models

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
F31 - International Economics - - International Finance - - - Foreign Exchange

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  8. Helinä Laakkonen, 2007. "The Impact of Macroeconomic News on Exchange Rate Volatility," Finnish Economic Papers, Finnish Society for Economic Research, vol. 20(1), pages 23-40, Spring. [Downloadable!]
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  9. Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Vega, Clara, 2002. "Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange," Working Papers 02-16, Duke University, Department of Economics. [Downloadable!]
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  11. Dominguez, Kathryn M.E. & Panthaki, Freyan, 2006. "What defines `news' in foreign exchange markets?," Journal of International Money and Finance, Elsevier, vol. 25(1), pages 168-198, February. [Downloadable!] (restricted)
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