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The response of individual FX dealers'quoting activity to macroeconomic news announcements

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  • BEN OMRANE, Walid
  • HEINEN, Andréas

Abstract

This 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.

Suggested Citation

  • BEN OMRANE, Walid & HEINEN, Andréas, 2003. "The response of individual FX dealers'quoting activity to macroeconomic news announcements," LIDAM Discussion Papers CORE 2003070, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2003070
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    References listed on IDEAS

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    1. Bauwens, Luc & Ben Omrane, Walid & Giot, Pierre, 2005. "News announcements, market activity and volatility in the euro/dollar foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 24(7), pages 1108-1125, November.
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    Cited by:

    1. Áron Gereben & György Gyomai & Norbert Kiss M., 2005. "The microstructure approach to exchange rates: a survey from a central bank’s viewpoint," MNB Occasional Papers 2005/42, Magyar Nemzeti Bank (Central Bank of Hungary).

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    More about this item

    Keywords

    foreign exchange; market microstructure; time series; count data;
    All these keywords.

    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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