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Intraday price discovery analysis in the foreign exchange market of an emerging economy: Mexico

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  • Martinez, Valeria
  • Tse, Yiuman

Abstract

We analyze intraday price discovery in the spot and futures markets for an emerging economy’s flexible exchange rate: the U.S. dollar–Mexican peso (USD-MXN) rate. The futures and spot markets are cointegrated and significantly driven by the common factor. Both markets rapidly respond to the disequilibrium between markets in a minute. Overall the spot market moderately leads futures in price discovery. We also look at the impact of Mexican government interventions on price discovery and find interventions have a significant impact on price discovery.

Suggested Citation

  • Martinez, Valeria & Tse, Yiuman, 2018. "Intraday price discovery analysis in the foreign exchange market of an emerging economy: Mexico," Research in International Business and Finance, Elsevier, vol. 45(C), pages 271-284.
    • Handle: RePEc:eee:riibaf:v:45:y:2018:i:c:p:271-284
    DOI: 10.1016/j.ribaf.2017.07.159
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    More about this item

    Keywords

    Central bank interventions; Currency; Futures; Price discovery; Quotes; Spot;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets

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