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

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  • Laakkonen Helinä

    (University of Helsinki and HECER)

  • Lanne Markku

    (University of Helsinki and HECER)

Abstract

We study the impact of positive and negative macroeconomic U.S. and European news announcements in different phases of the business cycle on the high-frequency volatility of the EUR/USD exchange rate. The results suggest that news effects depend on the state of the economy. In general, news increases volatility more in good times than in bad times. News effects are also asymmetric with respect to sign: negative 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.

Suggested Citation

  • Laakkonen Helinä & Lanne Markku, 2009. "Asymmetric News Effects on Exchange Rate Volatility: Good vs. Bad News in Good vs. Bad Times," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 14(1), pages 1-38, December.
    • Handle: RePEc:bpj:sndecm:v:14:y:2009:i:1:n:5
    DOI: 10.2202/1558-3708.1637
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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