Macroeconomic news, order flows and exchange rates
Under rational expectations and e±cient markets, the news contained in public information announcements is directly impounded into prices with there being no role for trades in this process of information assimilation. This paper directly tests this assertion using transaction level exchange rate data and a sample of scheduled macroeconomic announcements. The main result of the paper is that even information that is publicly and simultaneously released to all market participants is largely impounded into prices via the key micro-level price determinant order flow. We quantify the role that order flow plays and find that between a half and two thirds of price relevant information is incorporated into prices via the trading process.
Year of publication: |
2003-12
|
---|---|
Authors: | Payne, Richard |
Institutions: | Financial Markets Group |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Real Trading Patterns and Prices in Spot Foreign Exchange Markets
Danielsson, Jon, (1999)
-
Announcement Effects and Seasonality in the Intra-day Foreign Exchange Market
Payne, Richard, (1996)
-
A Transaction Level Study of the Effects of Central Bank Intervention on Exchange Rates
Payne, Richard, (2001)
- More ...