Abstract

http://ssrn.com/abstract=379080
 
 

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Public Information Releases, Private Information Arrival, and Volatility in the Foreign Exchange Market


Ramon P. DeGennaro


University of Tennessee, Knoxville - Department of Finance

Ronald E. Shrieves


University of Tennessee, Knoxville - Department of Finance

December 1997

Journal of Empirical Finance Volume 4, Issue 4, December 1997, Pages 295–315

Abstract:     
This paper estimates the impact of market activity and news on the volatility of returns in the exchange market for Japanese Yen and US dollars. We examine the effects of news on volatility before, during and after news arrival, using three categories of news. Market activity is proxied by quote arrival, separated into a predictable seasonal component and an unexpected component. Results indicate that both components of market activity, as well as news releases, affect volatility levels. We conclude that both private information and news effects are important determinants of exchange rate volatility. Our finding that unexpected quote arrival positively impacts foreign exchange rate volatility is consistent with the interpretation that unexpected quote arrival serves as a measure of informed trading. Corroborating this interpretation is regression analysis, which indicates that spreads increase in the surprise component of the quote arrival rate, but not in the expected component. The estimated impact of a unit increase in unexpected quote arrival and the range of values observed for this variable imply an important volatility conditioning role for informed trading.

Keywords: volatility, foreign exchange, information, news

JEL Classification: A1, C5, F3, G1, G2, M2

Accepted Paper Series


Not Available For Download

Date posted: March 28, 2003 ; Last revised: August 27, 2014

Suggested Citation

DeGennaro, Ramon P. and Shrieves, Ronald E., Public Information Releases, Private Information Arrival, and Volatility in the Foreign Exchange Market (December 1997). Journal of Empirical Finance Volume 4, Issue 4, December 1997, Pages 295–315. Available at SSRN: http://ssrn.com/abstract=379080 or http://dx.doi.org/10.2139/ssrn.379080

Contact Information

Ramon P. DeGennaro (Contact Author)
University of Tennessee, Knoxville - Department of Finance ( email )
423 Stokely Management Center
Knoxville, TN 37996
United States
865-974-1726 (Phone)
865-974-1716 (Fax)
Ronald E. Shrieves
University of Tennessee, Knoxville - Department of Finance ( email )
Knoxville, TN 37996
United States
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