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Jumps in Equilibrium Prices and Asymmetric News in Foreign Exchange Markets

Imane El Ouadghiri () and Remzi Uctum ()

No 2015-14, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: In this paper we examine the intraday effects of surprises from scheduled and unscheduled announcements on six major exchange rate returns (jumps) using an extension of the standard Tobit model with heteroskedastic and asymmetric errors. Since observed volatility at high frequency often contains microstructure noise, we use a recently proposed non parametric test to filter out noise and extract jumps from noise-free FX returns (Lee and Mykland (2012)). We found that the most influential scheduled macroeconomic news are globally related to job markets, output growth indicators and public debt. These surprises impact FX jumps rather in the form of good news, as a result of pessimistic forecasts from traders during the crisis period analyzed. We reconfirmed for most of the currencies the hypothesis that negative volatility shocks have a greater impact on volatility than positive shocks of the same magnitude, reflecting markets’ concern about the cost of stabilization policies.

Keywords: Forex market; announcements; jump detection test; high frequency data; microstructure noise; asymmetric GARCH. (search for similar items in EconPapers)
JEL-codes: G14 G12 E44 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mst
Date: 2015
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Related works:
Journal Article: Jumps in equilibrium prices and asymmetric news in foreign exchange markets (2016) Downloads
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)
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