News Announcements, Market Activity and Volatility in the Euro/Dollar Foreign Exchange Market
Journal of Internztional Money and Finance, Vol. 24, pp. 1108-1125, 2005
Posted: 21 Feb 2006
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
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