NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Do Currency Markets Absorb News Quickly?

Martin D.D. Evans, Richard K. Lyons

NBER Working Paper No. 11041
Issued in January 2005
NBER Program(s):   IFM   AP

This paper addresses whether macro news arrivals affect currency markets over time. The null from macro exchange-rate theory is that they do not: macro news is impounded in ex-change rates instantaneously. We test this by examining the effects of news on subsequent trades by end-user participants (such as hedge funds, mutual funds, and non-financial corporations). News arrivals induce subsequent changes in trading in all of the major end-user segments. These induced changes remain significant for days. Induced trades also have persistent effects on prices. Currency markets are not responding to news instantaneously.

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Document Object Identifier (DOI): 10.3386/w11041

Published: Evans, Martin D.D. & Lyons, Richard K., 2005. "Do currency markets absorb news quickly?," Journal of International Money and Finance, Elsevier, vol. 24(2), pages 197-217, March. citation courtesy of

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