Do Currency Markets Absorb News Quickly?
24 Pages Posted: 10 Jan 2005
There are 2 versions of this paper
Do Currency Markets Absorb News Quickly?
Do Currency Markets Absorb News Quickly?
Abstract
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 exchange 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.
Keywords: exchange rates, news, macroeconomic announcements
JEL Classification: E44, F31
Suggested Citation: Suggested Citation
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