How is macro news transmitted to exchange rates? |
| |
| Authors: | Martin DD Evans Richard K Lyons |
| |
| Institution: | 1. Department of Economics, Georgetown University, 37th and O St NW, Washington, DC 20057, USA;2. National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, MA 02138, USA;3. Haas School of Business U.C. Berkeley, Berkeley, CA 94720, USA;4. Goldman, Sachs & Co., 85 Broad Street, New York, NY 10004, USA |
| |
| Abstract: | Macro news can affect currency prices directly and indirectly via order flow. Past research shows that the direct effects of scheduled macro news account for less than 10% of daily price variance. This paper shows that the arrival of macro news can account for more than 30% of daily price variance. Two features of our analysis account for this finding: (1) We consider the broad spectrum of macro news items that market participants observe, not just scheduled announcements. (2) We allow the arrival of news to affect prices indirectly via its impact on the volatility of order flow. Our analysis shows that order flow variations contribute more to currency price dynamics following the arrival of public macro news than at other times. This is not consistent with news effects being common knowledge that is impounded in price directly. Roughly two-thirds of the total effect of macro news on the DM/$ exchange rate is transmitted via order flow. |
| |
| Keywords: | F31 G12 E44 |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
