Do Currency Markets Absorb News Quickly?
Martin Evans () and
Richard Lyons ()
No 11041, NBER Working Papers from National Bureau of Economic Research, Inc
This paper addresses whether macro news arrivals affect currency markets over time. The null from macro exchange-rate theory is that they do not: macro news is impounded in ex-change rates instantaneously. We test this by examining the effects of news on subsequent trades by end-user participants (such as hedge funds, mutual funds, and non-financial corporations). News arrivals induce subsequent changes in trading in all of the major end-user segments. These induced changes remain significant for days. Induced trades also have persistent effects on prices. Currency markets are not responding to news instantaneously.
JEL-codes: F3 F4 G1 (search for similar items in EconPapers)
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Published as Evans, Martin D.D. & Lyons, Richard K., 2005. "Do currency markets absorb news quickly?," Journal of International Money and Finance, Elsevier, vol. 24(2), pages 197-217, March.
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Chapter: Do Currency Markets Absorb News Quickly? (2017)
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