The Efficiency of the Information Processing in the Australian Dollar Market: Price Discovery Following Scheduled and Unscheduled News

45 Pages Posted: 27 Jan 2014 Last revised: 15 Sep 2014

See all articles by Lawrence Daniel

Lawrence Daniel

UNSW Australia Business School, School of Banking and Finance

Suk-Joong Kim

The University of Sydney Business School

Michael D. McKenzie

The University of Sydney - Discipline of Finance; University of Cambridge - Cambridge Endowment for Research in Finance (CERF); Financial Research Network (FIRN)

Date Written: January 25, 2014

Abstract

We jointly investigate the responses of the Australian dollar (AUD) order flow, realized volatility and trading volume to unscheduled Reuters news headline alerts and scheduled macroeconomic news from Australia, Japan, the Eurozone, the U.K., and the U.S. over the period 2 January 2007 to 31 December 2009. We find that Reuters foreign exchange and fixed income market news headlines are important, and those headlines that arrive during the Australian offshore trading hours matter more. Furthermore, the AUD market responded mostly to Australian and U.S. macroeconomic news which have direct relevance for the exchange rate. We also find that better than expected Japanese and Eurozone macroeconomic news elicited a response in the AUD and also that better than expected news from Australia, U.S. and U.K. matter more. Finally, we find that the volume response to news decreases at a slower rate than the volatility response and that order flows for the AUD respond only to scheduled news.

Keywords: Information arrival; Macroeconomic news; Australian Dollar; Order flows; Realized volatility; Trade Volume, Foreign Exchange

JEL Classification: F31; G15

Suggested Citation

Daniel, Lawrence and Kim, Suk-Joong and McKenzie, Michael David, The Efficiency of the Information Processing in the Australian Dollar Market: Price Discovery Following Scheduled and Unscheduled News (January 25, 2014). International Review of Financial Analysis, 32 (2014), 159-178., Available at SSRN: https://ssrn.com/abstract=2385223

Lawrence Daniel

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

Suk-Joong Kim (Contact Author)

The University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia
+61 2 9114 0940 (Phone)
+61 2 9351 6461 (Fax)

Michael David McKenzie

The University of Sydney - Discipline of Finance ( email )

Level 2 9 Castlereagh Street
Sydney, NSW 2000
Australia
+61 2 9114 0578 (Phone)
+61 2 9351 6461 (Fax)

University of Cambridge - Cambridge Endowment for Research in Finance (CERF) ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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