TY - JOUR
T1 - Analysis of the intraday effects of economic releases on the currency market
AU - Sun, Edward W.
AU - Rezania, Omid
AU - Rachev, Svetlozar T.
AU - Fabozzi, Frank J.
N1 - Funding Information:
Rachev and Sun benefitted from a grant from the Deutschen Forschungsgemeinschaft (DFG). As holder of the Frey Family Foundation Chair, Rachev acknowledges partial support from the chair’s endowment, as well as research support grants from the Division of Mathematical, Life and Physical Sciences, College of Letters and Science, University of California, Santa Barbara, the Deutschen Forschungsgemeinschaft, and the Deutscher Akademischer Austausch Dienst.
PY - 2011/6
Y1 - 2011/6
N2 - Using four years of second-by-second executed trade data, we study the intraday effects of a representative group of scheduled economic releases on three exchange rates: EUR/USD, JPY/USD, and GBP/USD. Using wavelets to analyze volatility behavior, we empirically show that intraday volatility clusters increase as we approach the time of the releases, and decay exponentially after the releases. Moreover, we compare our results with the results of a poll that we conducted of economists and traders. Finally, we propose a wavelet volatility estimator which is not only more efficient than a range estimator that is commonly used in empirical studies, but also captures the market dynamics as accurately as a range estimator. Our approach has practical value in high-frequency algorithmic trading, as well as electronic market making.
AB - Using four years of second-by-second executed trade data, we study the intraday effects of a representative group of scheduled economic releases on three exchange rates: EUR/USD, JPY/USD, and GBP/USD. Using wavelets to analyze volatility behavior, we empirically show that intraday volatility clusters increase as we approach the time of the releases, and decay exponentially after the releases. Moreover, we compare our results with the results of a poll that we conducted of economists and traders. Finally, we propose a wavelet volatility estimator which is not only more efficient than a range estimator that is commonly used in empirical studies, but also captures the market dynamics as accurately as a range estimator. Our approach has practical value in high-frequency algorithmic trading, as well as electronic market making.
KW - Economic release
KW - Foreign exchange
KW - High frequency
KW - Volatility estimation
KW - Wavelet
UR - http://www.scopus.com/inward/record.url?scp=79955507173&partnerID=8YFLogxK
U2 - 10.1016/j.jimonfin.2011.03.001
DO - 10.1016/j.jimonfin.2011.03.001
M3 - Article
AN - SCOPUS:79955507173
SN - 0261-5606
VL - 30
SP - 692
EP - 707
JO - Journal of International Money and Finance
JF - Journal of International Money and Finance
IS - 4
ER -