Jumps, Cojumps, and Efficiency in the Spot Foreign Exchange Market

79 Pages Posted: 7 Jun 2014 Last revised: 17 Jan 2018

See all articles by Louis R. Piccotti

Louis R. Piccotti

Oklahoma State University - Stillwater - Spears School of Business

Date Written: September 5, 2017

Abstract

I identify intraday jumps and cojumps in exchange rates controlling for volatility patterns and relate these events to pre-scheduled macroeconomic news and market conditions. Event study results show that preceding jump and cojump events, exchange rate quote volume, illiquidity, signed order flow, and informed trades are at heightened levels revealing that jump events are consistent with rational dealer quoting behavior. Following jump and cojump events, quote volume and return variance remain at heightened levels while illiquidity, informed trade, and signed order flow remain at depressed levels providing evidence that order flow following jump events is largely uninformed liquidity provision.

Keywords: Jumps, Cojumps, Foreign exchange market, Market efficiency, Stochastic volatility bias

JEL Classification: G12, G14, G15

Suggested Citation

Piccotti, Louis R., Jumps, Cojumps, and Efficiency in the Spot Foreign Exchange Market (September 5, 2017). Piccotti, Louis R. (2018). Jumps, Cojumps, and Efficiency in the Spot Foreign Exchange Market, Journal of Banking & Finance 87, 49-67, Available at SSRN: https://ssrn.com/abstract=2446588 or http://dx.doi.org/10.2139/ssrn.2446588

Louis R. Piccotti (Contact Author)

Oklahoma State University - Stillwater - Spears School of Business ( email )

460 Business
Stillwater, OK 74078-0555
United States

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