| Summary: | 碩士 === 輔仁大學 === 統計資訊學系應用統計碩士班 === 102 === News about macroeconomic fundamentals exerts significant influences on foreign exchange markets. How such macroeconomic news acts on the reversal of currency rates is of major interest to investors of currency market. It however remains to be one of the least well understood issues.
This research studies the dominant trend reversion factors of exchange rate by two-stage model. Unexpected US macroeconomic news are tested on five exchange rates: British pound, euro, Canadian dollar, Australian dollar and Japanese yen vs. US dollar. We apply a two- stage logit model to study the effect of periodically announced news and to estimate odds of how likely a currency rate reversal occurs accordingly. Commonly recognized macroeconomic news (27 in total) is grouped into five categorizes, i.e. production, consumption, inflation, employment, and growth. Our sample consists of exchange rates of period of January 2001 to December 2013. This sample data set of a comparatively long period makes it possible to observe the price reaction to news across currency markets under diverse market condition including the world-wide recognized financial crisis occurred at years of 2007 to 2008.
This paper is the first to carry out an empirical check of currency price reversal reaction to news surprises. Our findings on exchange rate reversal reveal news announcements effects. We find some key statistical evidences of how markets of five major currencies react to news. Firstly, the overall explanatory power of the fundamental in our sample changes over time. For all currencies in our sample are more sensitive to news before crisis, however the fundamentals continues to be an important driving force behind recent movements and in term, reversals the trend among exchange rates. Secondly, in the time period before crisis, the findings of periodically released news about, in general, production and inflations impact on the reversals. After crisis, one more consumption related types of news: production is added to the significant effect. Thirdly, significant reversal news changes in two sub-periods and various among all currencies. And finally, EUR/USD responds significantly to more news with expected direction than the other four currency rates.
|
|---|
