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"Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange"

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Bollerslev_ micro_effects_of_macro_announcements.pdf
845.9 Kb
Bollerslev_ micro_effects_of_macro_announcements.pdf
845.9 Kb
Date
2003
Authors
Andersen, TG
Bollerslev, T
Diebold, FX
Vega, C
Repository Usage Stats
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262
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Abstract
Using a new dataset consisting of six years of real-time exchange rate quotations, macroeconomic expectations, and macroeconomic realizations (announcements), we characterize the conditional means of U.S. dollar spot exchange rates versus German Mark, British Pound, Japanese Yen, Swiss Franc, and the Euro. In particular, we find that announcement surprises (that is, divergences between expectations and realizations, or “news”) produce conditional mean jumps; hence high-frequency exchange rate dynamics are linked to fundamentals. The details of the linkage are intriguing and include announcement timing and sign effects. The sign effect refers to the fact that the market reacts to news in an asymmetric fashion: bad news has greater impact than good news, which we relate to recent theoretical work on information processing and price discovery.
Type
Journal article
Subject
Anticipations data
Asset return volatility
Expectations data
Forecasting
Macroeconomic news announcements
Market microstructure
Order flow
exchange rates
Permalink
https://hdl.handle.net/10161/1728
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Scholars@Duke

Bollerslev

Tim Bollerslev

Juanita and Clifton Kreps Distinguished Professor of Economics, in Trinity College of Arts and Sciences
Professor Bollerslev conducts research in the areas of time-series econometrics, financial econometrics, and empirical asset pricing finance. He is particularly well known for his developments of econometric models and procedures for analyzing and forecasting financial market volatility. Much of Bollerslev’s recent research has focused on the analysis of newly available high-frequency intraday, or tick-by-tick, financial data and so-called realized volatility measures, macroeconomic news annou
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