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Overnight price discovery and the internationalization of a currency: The case of the Korean won

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  • Wang, Jianxin

Abstract

This paper proposes a measure for the level of internationalization of a currency. It is based on the relative share of price discovery, termed the information share, in overnight offshore markets. I show that the overnight offshore markets play an increasingly important role in determining the KRW/USD exchange rate. The information share of the overnight offshore markets has increased from less than 10% in 1999–2000 to above 50% in 2011–2012. The variations in the overnight information share are consistent with variations in overnight market efficiency and investor learning.

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  • Wang, Jianxin, 2014. "Overnight price discovery and the internationalization of a currency: The case of the Korean won," Pacific-Basin Finance Journal, Elsevier, vol. 29(C), pages 86-95.
    • Handle: RePEc:eee:pacfin:v:29:y:2014:i:c:p:86-95
    DOI: 10.1016/j.pacfin.2014.03.003
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    1. Guonan Ma & Corrinne Ho & Robert N McCauley, 2004. "The markets for non-deliverable forwards in Asian currencies," BIS Quarterly Review, Bank for International Settlements, June.
    2. Wang, Jianxin & Yang, Minxian, 2015. "How well does the weighted price contribution measure price discovery?," Journal of Economic Dynamics and Control, Elsevier, vol. 55(C), pages 113-129.
    3. Barclay, Michael J. & Hendershott, Terrence, 2008. "A comparison of trading and non-trading mechanisms for price discovery," Journal of Empirical Finance, Elsevier, vol. 15(5), pages 839-849, December.
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    Cited by:

    1. repec:uts:finphd:39 is not listed on IDEAS
    2. Ran Xiao, 2019. "Essays on Price Discovery and Volatility Dynamics in Emerging Market Currencies," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 5-2019, January-A.
    3. Su, Fei, 2021. "Conditional volatility persistence and volatility spillovers in the foreign exchange market," Research in International Business and Finance, Elsevier, vol. 55(C).
    4. Fei Su, 2018. "Essays on Price Discovery and Volatility Dynamics in the Foreign Exchange Market," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 2-2018, January-A.
    5. repec:uts:finphd:38 is not listed on IDEAS

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    More about this item

    Keywords

    Currency internationalization; Overnight price discovery; Information share; Offshore markets;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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