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Abstract:
We introduce a new high-frequency foreign exchange dataset from EBS
(Electronic Broking Service) that includes trading volume in the global interdealer spot
market, data not previously available to researchers. The data also gives live transactable
quotes, rather than the indicative quotes that have been used in most previous high
frequency foreign exchange analysis. We describe intraday volume and volatility
patterns in euro-dollar and dollar-yen trading. We study the effects of scheduled U.S.
macroeconomic data releases, first confirming the finding of recent literature that the
conditional mean of the exchange rate responds very quickly to the unexpected
component of data releases. We next study the effects of data releases on trading
volumes. News releases cause volume to rise, and to remain elevated for a longer period.
However, in contrast to the result for the level of the exchange rate, even if the data
release is entirely in line with expectations, we find that there is still typically a large
pickup in trading volume.
Full paper (489 KB PDF)
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Keywords
foreign exchange, trading volume, news announcements, high-frequency data, conditional mean, conditional volatility
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