Trading European Central Bank rumours on the EUR-USD exchange rate market

Baback Roodbar, Hugh Metcalf, Fabrizio Casalin

Risultato della ricerca: Contributo su rivistaArticolo in rivistapeer review

Abstract

This paper investigates whether the release of market-relevant news in the form of rumours on Twitter can explain the excess of market volatility previously attributed to private information, speculation, and noise traders. We define a simple theoretical model to show that the systematic information content of such rumours should result in detectable price effects in macro-markets. We then pinpoint the arrival of 63 rumours of forthcoming ECB actions over a 420-day sample of one-minute spot EUR-USD rates, and show that there is a real-time, intraday increase in market volatility. This largely unexplored information set can potentially account for significant amounts of unexplained volatility in macro-markets and, therefore, identify a possible explanation of one of the most prominent puzzles in price discovery research.

Lingua originaleInglese
pagine (da-a)53-70
Numero di pagine18
RivistaInternational Review of Financial Analysis
Volume61
DOI
Stato di pubblicazionePubblicato - gen 2019
Pubblicato esternamente

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