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Fixed Versus Flexible : Lessons from EMS Order Flow
Killeen, William P. - 2010
This paper addresses the puzzle of regime-dependent volatility in foreign exchange. We extend the literature in two ways. First, our microstructural model provides a qualitatively new explanation for the puzzle. Second, we test implications of our model using Europe's recent shift to rigidly...
Persistent link: https://www.econbiz.de/10012763111
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The Term Structure of Forward Exchange Premia and the Forecastibility of Spot Exchange Rates : Correcting the Errors
Clarida, Richard - 2010
We present theory and evidence that challenges the view that forward premia contain little information regarding … premia. Dynamic forecasts indicate that the information in the forward premia can be used to reduce the root mean squared …
Persistent link: https://www.econbiz.de/10012763403
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Trigger Strategies and Price Dynamics in Equity and Foreign Exchange Markets
Krugman, Paul R. - 2010
Trigger strategist-s may be defined as act-ors in asset markets who buy or sell when the price reaches a predetermined level ; t-hey include participants in portfolio insurance schemes in equity markets and central banks who intervene to defend an exchange rate target zone. This paper presents...
Persistent link: https://www.econbiz.de/10012763462
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Private Beliefs and Information Externalities in the Foreign Exchange Market
Lyons, Richard K. - 2010
An information externality exists in the foreign exchange market due to the fact that traders play two partially … conflicting roles: (i) each is a speculator and (ii) each is an information clearinghouse in that each intermediates own …-customer orders which convey information. Profit maximization induces traders to underweight fundamental information in making their …
Persistent link: https://www.econbiz.de/10012763520
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Exchange Rate Forecasting Techniques, Survey Data, and Implications for the Foreign Exchange Market
Frankel, Jeffrey A. - 2010
The paper presents new empirical results that elucidate the dynamics of the foreign exchange market. The first half of the paper is an updated study of the exchange rate expectations held by market participants, as reflected in responses to surveys, and contains the following conclusions. First,...
Persistent link: https://www.econbiz.de/10012763525
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Heterogeneous Information Arrivals and Return Volatility Dynamics : Uncovering the Long-Run in High Frequency Returns
Andersen, Torben G. - 2010
are typically observed with high-frequency intradaily returns. This paper draws on the information arrival, or mixture … as the manifestation of numerous heterogeneous information arrivals, sudden bursts of volatility typically will have both …
Persistent link: https://www.econbiz.de/10012763898
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Predictability and 'Good Deals' in Currency Markets
Levich, Richard M. - 2009
This paper studies predictability of currency returns over the period 1971-2006. To assess the economic significance of currency predictability, we construct an upper bound on the explanatory power of predictive regressions. The upper bound is motivated by quot;no good-dealquot; restrictions...
Persistent link: https://www.econbiz.de/10012765564
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Tests of Excess Forecast Volatility in the Foreign Exchange and Stock Markets
Froot, Kenneth - 2004
Simple regression tests that have power against the alternatives that. asset prices and expected future asset returns are excessively volatile are developed and performed for the foreign exchange and stock markets. These tests have a number of advantages over alternative, variance hounds...
Persistent link: https://www.econbiz.de/10012786275
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Target Zones with Limited Reserves
Krugman, Paul R. - 2008
Like a fixed exchange rate, a target zone system may be subject to speculative attacks when the reserves of the central bank are limited. Thispaper analyzes such speculative attacks and their implications; it shows that the recently developed quot;smooth pastingquot; model of target zones should...
Persistent link: https://www.econbiz.de/10012774869
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Contagious Currency Crises
Eichengreen, Barry; Rose, Andrew Kenan; Wyplosz, Charles - 2010
This paper is concerned with the fact that the incidence of speculative attacks tends to be temporally correlated; that is, currency crises appear to pass contagiously from one country to another. The paper provides a survey of the theoretical literature, and analyzes the contagious nature of...
Persistent link: https://www.econbiz.de/10014076135