What Defines "News" in Foreign Exchange Markets? / Kathryn Dominguez, Freyan Panthaki.

Format:

Book

Author/Creator:

Dominguez, Kathryn.

Contributor:

National Bureau of Economic Research.

Panthaki, Freyan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11769.

NBER working paper series no. w11769

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

This paper examines whether the traditional sets of macro surprises, that most of the literature considers, are the only sorts of news that can explain exchange rate movements. We examine the intra-daily influence of a broad set of news reports, including variables which are not typically considered "fundamentals" in the context of standard models of exchange rate determination, and ask whether they too help predict exchange rate behavior. We also examine whether "news" not only impacts exchange rates directly, but also influences exchange rates via order flow (signed trade volume). Our results indicate that along with the standard fundamentals, both non-fundamental news and order flow matter, suggesting that future models of exchange rate determination ought to include all three types of explanatory variables.

Notes:

Print version record

November 2005.