TY  - JOUR
AU  - Engle,Robert F.
AU  - Ito,Takatoshi
AU  - Lin,Wen-Ling
TI  - Meteor Showers or Heat Waves?  Heteroskedastic Intra-Daily Volatility in the Foreign Exchange Market
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2609
PY  - 1991
Y2  - February 1991
UR  - http://www.nber.org/papers/w2609
L1  - http://www.nber.org/papers/w2609.pdf
N1  - Author contact info:
Robert F. Engle, III
Department of Finance, Stern School of Business
New York University, Salomon Center
44 West 4th Street, Suite 9-160
New York, NY  10012-1126
Tel: 212/998-0710
Fax: 212/995-4220
E-Mail: rengle@stern.nyu.edu

Takatoshi Ito
Graduate School of Economics
University of Tokyo
7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
JAPAN
Tel: 81-3-5841-5608
Fax: 81-3-5841-5521
E-Mail: tito@e.u-tokyo.ac.jp
AB  - This paper defines and tests a form of market efficiency called market dexterity which requires that asset prices adjust instantaneously and completely in response to new information. Examining the behavior of the yen/dollar exchange rate while each of the major markets are open it is possible to test for informational effects from one market to the next. Assuming that news has only country specific autocorrelation such as a heat wave. any intra-daily volatility spillovers (meteor showers) become evidence against market dexterity. ARCII models are employed to model heteroskedasticity across intra-daily market segments. Statistical tests lead to the rejection of the heat wave and therefore the market dexterity hypothesis. Using a volatility type of vector autoregression we examine the impact of news in one market on the time path of volatility in other markets.
ER  -