Jumps in equilibrium prices and asymmetric news in foreign exchange markets
Imane El Ouadghiri () and
Remzi Uctum
Economic Modelling, 2016, vol. 54, issue C, 218-234
Abstract:
In this paper we examine the intraday effects of surprises from scheduled macroeconomic announcements and unscheduled event news on six major exchange rate excess returns (jumps) using a Tobit model with conditionally heteroskedastic errors that we extend so as to account for asymmetries. Besides this novel model, our approach embodies several important features: we perform Lee and Mykland's (2012) non-parametric test procedure to filter out microstructure noise from observed exchange rates and extract jumps as the significant “equilibrium” returns; various categories of information news from different geographical regions are exploited; the hypothesis of a leverage effect on foreign exchange jumps due to asymmetric volatility shocks is examined. We found that the most influential scheduled macroeconomic news are globally related to the US job markets, output growth indicators and public debt, whereas significant event news include announcements of bank failures and government rescue plans. Surprises impact Forex jumps for about one third as a result of rather pessimistic forecasts due to the crisis period analyzed. For most of the currencies the hypothesis that negative volatility shocks have a greater impact on volatility than positive shocks of the same magnitude is validated, reflecting markets' concern about the costs implied by central bank's stabilization policies. Our findings provide evidence that the major foreign exchange markets are not efficient.
Keywords: Forex market; Announcements; Jump detection test; High frequency data; Microstructure noise; Asymmetric GARCH (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999315004216
Full text for ScienceDirect subscribers only
Related works:
Working Paper: Jumps in equilibrium prices and asymmetric news in foreign exchange markets (2016)
Working Paper: Jumps in Equilibrium Prices and Asymmetric News in Foreign Exchange Markets (2015) 
Working Paper: Jumps in equilibrium prices and asymmetric news in foreign exchange markets (2015)
Working Paper: Jumps in equilibrium prices and asymmetric news in foreign exchange markets (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:54:y:2016:i:c:p:218-234
DOI: 10.1016/j.econmod.2015.12.025
Access Statistics for this article
Economic Modelling is currently edited by S. Hall and P. Pauly
More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().