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


Torben G. Andersen


Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER); University of Aarhus - CREATES

Clara Vega


Board of Governors of the Federal Reserve System

Tim Bollerslev


Duke University - Finance; Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Francis X. Diebold


University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)
May 2002

NBER Working Paper No. w8959

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.

Number of Pages in PDF File: 38

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Date posted: May 24, 2002  

Suggested Citation

Andersen, Torben G., Vega, Clara, Bollerslev, Tim and Diebold, Francis X., Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange (May 2002). NBER Working Paper No. w8959. Available at SSRN: http://ssrn.com/abstract=313660

Contact Information

Torben G. Andersen (Contact Author)
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
University of Aarhus - CREATES ( email )
School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark
Clara Vega
Board of Governors of the Federal Reserve System ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
HOME PAGE: http://www.federalreserve.gov/research/staff/vegaclarax.htm
Tim Bollerslev
Duke University - Finance ( email )
Durham, NC 27708-0120
United States
919-660-1846 (Phone)
919-684-8974 (Fax)
Duke University - Department of Economics
Durham, NC 27708-0204
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Francis X. Diebold
University of Pennsylvania - Department of Economics ( email )
3718 Locust Walk
Philadelphia, PA 19104
United States
215-898-1507 (Phone)
215-573-4217 (Fax)
HOME PAGE: http://www.ssc.upenn.edu/~fdiebold/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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References:  55
Citations:  222

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