Do Currency Markets Absorb News Quickly?

25 Pages Posted: 4 Feb 2005 Last revised: 3 Sep 2022

See all articles by Martin D.D. Evans

Martin D.D. Evans

Georgetown University - Department of Economics

Richard K. Lyons

University of California, Berkeley; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2005

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 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.

Suggested Citation

Evans, Martin D.D. and Lyons, Richard K., Do Currency Markets Absorb News Quickly? (January 2005). NBER Working Paper No. w11041, Available at SSRN: https://ssrn.com/abstract=649728

Martin D.D. Evans (Contact Author)

Georgetown University - Department of Economics ( email )

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Richard K. Lyons

University of California, Berkeley ( email )

Haas School of Business
Berkeley, CA 94720
United States
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510-643-1420 (Fax)

National Bureau of Economic Research (NBER)

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