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Do trading hours affect volatility links in the foreign exchange market?

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  • Sirimon Treepongkaruna
  • Robert Brooks
  • Stephen Gray

Abstract

This paper explores whether volatility linkages exist at the intra-daily frequency in the foreign exchange market, and whether market trading hours affect volatility transmission. To answer these questions, we apply the Fleming, Kirby and Ostdiek model (1998) to 21 currency pairs using hourly data and allowing specific consideration to be given to the role of which market is open in driving volatility linkages. Our findings indicate that hourly volatility is less persistent than daily volatility. We also find that market trading hours play a different role in driving volatility linkages for major and non-major currencies. For major currency pairs, we find that simultaneous trading hours are not critical for the processing of information flow. However, for the other currency pairings volatility transmission is affected by which markets are open.

Suggested Citation

  • Sirimon Treepongkaruna & Robert Brooks & Stephen Gray, 2012. "Do trading hours affect volatility links in the foreign exchange market?," Australian Journal of Management, Australian School of Business, vol. 37(1), pages 7-27, April.
    • Handle: RePEc:sae:ausman:v:37:y:2012:i:1:p:7-27
    DOI: 10.1177/0312896211411934
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    Cited by:

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    2. Sviatoslav Rosov & F Douglas Foster, 2014. "Customer foreign exchange orders: When timing really does matter," Australian Journal of Management, Australian School of Business, vol. 39(3), pages 351-368, August.
    3. Baklaci, Hasan Fehmi & Aydoğan, Berna & Yelkenci, Tezer, 2020. "Impact of stock market trading on currency market volatility spillovers," Research in International Business and Finance, Elsevier, vol. 52(C).
    4. Sviatoslav Rosov & F. Douglas Foster, 2014. "Measuring the information content of customer foreign exchange orders," Australian Journal of Management, Australian School of Business, vol. 39(2), pages 247-264, May.
    5. Linnenluecke, Martina K. & Chen, Xiaoyan & Ling, Xin & Smith, Tom & Zhu, Yushu, 2016. "Emerging trends in Asia-Pacific finance research: A review of recent influential publications and a research agenda," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 66-76.

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