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New Effects in a High-Frequency Model of the Sterling-Dollar Exchange Rate

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  • Goodhart, C A E, et al

Abstract

This paper uses an extremely high frequency data set on the dollar-sterling exchange rate to investigate the impact of news events on the very short-term movements in exchange rates. The data set is a continuous record of the quoted price for the exchange rate on the Reuters screen. As such it records some 130,000 observations over an 8-week period. The paper investigates the time-series properties of the data using orthodox regression models, and then by making allowance for a time-varying conditional variance. The conclusions vary significantly in moving to this more sophisticated model. The exercises are repeated now incorporating news announcement effects, letting these affect the level of the exchange rate and then the conditional variance process. Again it is found that the conclusions are radically altered in moving to the increasingly sophisticated model. Coauthors are S. G. Hall, S. G. G. Henry, and B. Pesaran. Copyright 1993 by John Wiley & Sons, Ltd.

Suggested Citation

  • Goodhart, C A E, et al, 1993. "New Effects in a High-Frequency Model of the Sterling-Dollar Exchange Rate," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(1), pages 1-13, Jan.-Marc.
    • Handle: RePEc:jae:japmet:v:8:y:1993:i:1:p:1-13
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    Cited by:

    1. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2003. "Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange," American Economic Review, American Economic Association, vol. 93(1), pages 38-62, March.
    2. Martin D. D. Evans & Richard K. Lyons, 2017. "Do Currency Markets Absorb News Quickly?," World Scientific Book Chapters, in: Studies in Foreign Exchange Economics, chapter 12, pages 477-505, World Scientific Publishing Co. Pte. Ltd..
    3. Aron Drew & Özer Karagedikli, 2007. "Some Benefits of Monetary-Policy Transparency in New Zealand," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(11-12), pages 521-539, December.
    4. Martin D. D. Evans & Richard K. Lyons, 2017. "How is Macro News Transmitted to Exchange Rates?," World Scientific Book Chapters, in: Studies in Foreign Exchange Economics, chapter 14, pages 547-596, World Scientific Publishing Co. Pte. Ltd..
    5. David-Jan Jansen & Jakob de Haan & Jakob de Haan, 2003. "Statements of ECB Officials and their Effect on the Level and Volatility of the Euro-Dollar Exchange Rate," CESifo Working Paper Series 927, CESifo.
    6. Pierre L. Siklos & Martin T. Bohl, 2008. "Policy words and policy deeds: the ECB and the euro," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(3), pages 247-265.
    7. Parker, John, 2007. "The Impact Of Economic News On Financial Markets," MPRA Paper 2675, University Library of Munich, Germany.
    8. Chan, Kam Fong & Powell, John G. & Treepongkaruna, Sirimon, 2014. "Currency jumps and crises: Do developed and emerging market currencies jump together?," Pacific-Basin Finance Journal, Elsevier, vol. 30(C), pages 132-157.
    9. Anna Calamia, 1999. "Market Microstructure: Theory and Empirics," LEM Papers Series 1999/19, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    10. Hui Guo & Robert Savickas, 2006. "Idiosyncratic volatility, economic fundamentals, and foreign exchange rates," Working Papers 2005-025, Federal Reserve Bank of St. Louis.
    11. Thomas Schuster, 2003. "News Events and Price Movements. Price Effects of Economic and Non-Economic Publications in the News Media," Finance 0305009, University Library of Munich, Germany.
    12. Yuko Hashimoto, 2004. "The Impact of the Japanese Banking Crisis on the Intraday FX Market," Econometric Society 2004 Far Eastern Meetings 679, Econometric Society.

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