Macroeconomic announcements and price discovery in the foreign exchange market

Yin Feng Gau, Zhen Xing Wu

Research output: Contribution to journalArticlepeer-review

19 Scopus citations

Abstract

This study shows that the dominance of the overlapping trading hours of London and New York in the price discovery of the EUR/USD and USD/JPY markets only applies on days with U.S. announcements. Different from Cai et al. (2008) and Wang and Yang (2011), we highlight the informational advantage of local traders at the arrival of macroeconomic announcements in the local market, and find that macroeconomic announcements affect the pattern of price discovery across different markets, consistent with Chen and Gau (2010) and Jiang et al. (2012). We also examine changes in information shares before and after the announcement. A significant increase in price discovery before the announcement suggests the possibility of information leakage, while enhanced price discovery efficacy after the announcement suggests that prices gradually adjust to new information, not just immediately respond to the arrival of announcements.

Original languageEnglish
Pages (from-to)232-254
Number of pages23
JournalJournal of International Money and Finance
Volume79
DOIs
StatePublished - Dec 2017

Keywords

  • Electronic Broking Services (EBS)
  • Foreign exchange market
  • Macroeconomic announcements
  • Price discovery
  • Realized variance

Fingerprint

Dive into the research topics of 'Macroeconomic announcements and price discovery in the foreign exchange market'. Together they form a unique fingerprint.

Cite this