Macroeconomic news, order flows and exchange rates

Ryan Love and Richard Payne ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Under rational expectations and efficient markets, the news contained in public information announcements is directly impounded into prices with there being no role for trades in this process of information assimilation. This paper directly tests this assertion using transaction level exchange rate data and a sample of scheduled macroeconomic announcements. The main result of the paper is that even information that is publicly and simultaneously released to all market participants is largely impounded into prices via the key micro-level price determinant — order flow. We quantify the role that order flow plays and find that between a half and two thirds of price relevant information is incorporated into prices via the trading process.

JEL-codes: E00 G10 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2003-08-21
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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http://eprints.lse.ac.uk/24901/ Open access version. (application/pdf)

Related works:
Journal Article: Macroeconomic News, Order Flows, and Exchange Rates (2008)
Working Paper: Macroeconomic news, order flows and exchange rates (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:24901

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