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Price Discovery and Liquidity Recovery: Forex Market Reactions to Macro Announcements / Masahiro Yamada, Takatoshi Ito.
- Format:
- Book
- Author/Creator:
- Yamada, Masahiro.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w27036.
- NBER working paper series no. w27036
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2020.
- Summary:
- We examine whether the forex market quality, measured by the speed of price discovery and liquidity recovery after macro statistics announcements, has improved using the EBS high-frequency data for 20 years. Considering the recent rise of computer-based trading, a popular conjecture is that the market quality has improved. Our empirical analysis, however, suggests that an improving trend is only observed in price discovery. Moreover, two measures are negatively correlated because an increasing number of traders improves liquidity but slows down price discovery. Theoretically, the latter finding implies that "fast" traders have a poor interpretation of how the news will impact prices.
- Notes:
- Print version record
- April 2020.
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