Testing for Market Microstructure Effects in Intraday Volatility: A Reassessment of the Tokyo FX Experiment / Torben G. Anderson, Tim Bollerslev, Ashish Das.

Format:

Book

Author/Creator:

Anderson, Torben G.

Contributor:

National Bureau of Economic Research.

Bollerslev, Tim.

Das, Ashish.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6666.

NBER working paper series no. w6666

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Testing for Market Microstructure Effects in Intraday Volatility

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1998.

Summary:

This paper develops mew robust inference procedures for analyzing the intraday return volatility patterns that constitute a focal point of much market microstructure theory. Our empirical analysis is motivated by the recent lifting of trading restrictions in the interbank foreign exchange (FX) market for Japanese banks during the Tokyo lunch period. Ito, Lyons, and Melvin (1998) (ILM) argue that this deregulation resulted in a highly significant shift in the volatility pattern across the entire Japanese trading day, indicating that private information is an important component of the price formation process in the FX market. In contrast, our robust analysis finds no evidence for any discernible change in the pattern outside of the Tokyo lunch period. Moreover, we document that the standard variance-ratio methodology inference in this high-frequency data context.

Notes:

Print version record

July 1998.