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

Walid Ben Omrane and Andréas Heinen

No 2003070, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

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.

Keywords: foreign exchange; market microstructure; time series; count data (search for similar items in EconPapers)
JEL-codes: C35 F31 G15 (search for similar items in EconPapers)
Date: 2003-10
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2003070

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