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Do currency markets absorb news quickly?

  • Evans, Martin D.D.
  • Lyons, Richard K.

This paper addresses whether macro news arrivals affect currency markets over time. The null from macro exchange-rate theory is that they do not: macro news is impounded in ex-change rates instantaneously. We test this by examining the effects of news on subsequent trades by end-user participants (such as hedge funds, mutual funds, and non-financial corporations). News arrivals induce subsequent changes in trading in all of the major end-user segments. These induced changes remain significant for days. Induced trades also have persistent effects on prices. Currency markets are not responding to news instantaneously.

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File URL: http://www.sciencedirect.com/science/article/pii/S0261-5606(04)00113-5
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Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 24 (2005)
Issue (Month): 2 (March)
Pages: 197-217

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Handle: RePEc:eee:jimfin:v:24:y:2005:i:2:p:197-217
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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  16. Yin-Wong Cheung & Menzie D. Chinn, 2000. "Currency Traders and Exchange Rate Dynamics: A Survey of the U.S. Market," CESifo Working Paper Series 251, CESifo Group Munich.
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