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Market response to news: rationality and conformism in an euro-dollar exchange rate model

Market response to news: rationality and conformism in an euro-dollar exchange rate model

Cagliesi, Gabriella, Della Bina, Antonio Carlo Francesco and Tivegna, Massimo (2014) Market response to news: rationality and conformism in an euro-dollar exchange rate model. [Working Paper]

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Abstract

This paper examines the determinants of the Euro/US Dollar exchange rate during the 2003-2011 period to investigate the possible effects of the financial crisis on dynamics of the Euro-Dollar rate. We use an EGARCH (3,1) news-type model with thrice-daily frequency data to represent three temporal trading zones with unscheduled news in addition to the traditional scheduled macroeconomic news. In line with some behavioral finance insights, we find that when comparing pre-crisis and post crisis periods there are noticeable differences in agents’ attitudes across the three trading time zones in terms of asymmetric reactions, over/under-reactions to news, policies and fundamentals variables.

Item Type: Working Paper
Uncontrolled Keywords: exchange rate, macroeconomic announcements, behavioural finance,
Subjects: H Social Sciences > HG Finance
Faculty / Department / Research Group: Faculty of Business > Greenwich Political Economy Research Centre (GPERC)
Related URLs:
Last Modified: 14 May 2018 09:16
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
URI: http://gala.gre.ac.uk/id/eprint/11195

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