A Survey of Announcement Effects on Foreign Exchange Volatility and Jumps

25 Pages Posted: 14 May 2021

See all articles by Christopher J. Neely

Christopher J. Neely

Federal Reserve Bank of St. Louis - Research Division

Date Written: 2011

Abstract

This article reviews, evaluates, and links research that studies foreign exchange volatility reaction to macro announcements. Scheduled and unscheduled news typically raises volatility for about an hour and often causes price discontinuities or jumps. News contributes substantially to volatility but other factors contribute even more to periodic volatility. The same types of news that affect returns?payrolls, trade balance, and interest rate shocks?are also the most likely to affect volatility, and U.S. news tends to produce more volatility than foreign news. Recent research has linked news to volatility through the former?s effect on order flow. Empirical research has confirmed the predictions of microstructure theory on how volatility might depend on a number of factors: the precision of the information in the news, the state of the business cycle, and the heterogeneity of traders? beliefs.

Suggested Citation

Neely, Christopher J., A Survey of Announcement Effects on Foreign Exchange Volatility and Jumps (2011). FRB of St. Louis Review, Available at SSRN: https://ssrn.com/abstract=3843854

Christopher J. Neely (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States
314-444-8568 (Phone)
314-444-8731 (Fax)

HOME PAGE: http://www.stls.frb.org/research/econ/cneely/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
15
Abstract Views
53
PlumX Metrics