News Announcements, Market Activity and Volatility in the Euro/Dollar Foreign Exchange Market
CORE Discussion Paper
27 Pages Posted: 7 May 2003
Date Written: March 2003
This paper deals with the impact of nine categories of scheduled and unscheduled news announcements on the Euro/Dollar return volatility. We highlight and analyze the pre-announcement, contemporaneous and post-announcement reactions. Using high-frequency intraday data and within the framework of ARCH-type and realized volatility models, we show that volatility increases in the pre-announcement periods, particularly before scheduled events. Market activity also significantly impacts return volatility as expected by the theoretical literature on order flow.
Keywords: foreign exchange market, volatility, news announcements, high frequency data
JEL Classification: C13, C22, F31, G14
Suggested Citation: Suggested Citation