Analysis of the intraday effects of economic releases on the currency market

Omid Rezania, Svetlozar T. Rachev, Edward Sun and Frank Fabozzi ()

No 3, Working Paper Series in Economics from Karlsruhe Institute of Technology (KIT), Department of Economics and Management

Abstract: Using four years of second-by-second executed trade data, we study the intraday effects of a representative group of scheduled economic releases on three exchange rates: EUR/$, JPY/$ and GBP/$. Using wavelets to analyze volatility behavior, we empirically show that intraday volatility clusters increase as we approach the time of the releases, and decay exponentially after the releases. Moreover, we compare our results with the results of a poll that we conducted of economists and traders. Finally, we propose a wavelet volatility estimator which is not only more efficient than a range estimator that is commonly used in empirical studies, but also captures the market dynamics as accurately as a range estimator. Our approach has practical value in high-frequency algorithmic trading, as well as electronic market making.

Keywords: Foreign exchange; volatility estimation; economic release; wavelet; high frequency (search for similar items in EconPapers)
JEL-codes: F31 G14 G15 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-mst
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https://www.econstor.eu/bitstream/10419/40248/1/635408384.pdf (application/pdf)

Related works:
Journal Article: Analysis of the intraday effects of economic releases on the currency market (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kitwps:3

DOI: 10.5445/IR/1000019772

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