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

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

Journal of International Money and Finance, 2011, vol. 30, issue 4, 692-707

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/USD, JPY/USD, and GBP/USD. 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)
Date: 2011
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Citations: View citations in EconPapers (15)

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Working Paper: Analysis of the intraday effects of economic releases on the currency market (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:30:y:2011:i:4:p:692-707

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