Résumé

This paper investigates the link between jumps in the exchange rate process and rumors of central bank interventions. Using the case of Japan, we analyze specifically whether jumps trigger false reports of intervention (i.e. an intervention is reported when it did not occur). Intraday jumps are extracted using a non-parametric technique recently proposed by Lee and Mykland (2007) and by Andersen et al. (2007), and later modified in Boudt et al.(2008). Rumors are identified by using a unique database of Reuters and Dow Jones newswires. Our results suggest that a significant number of jumps on the YEN/USD have been falsely interpreted by the market as being the result of a central bank intervention. The paper has policy implications in terms of central bank interventions. We show that in times where the central bank is known to intervene, some investors may attach a lot of weight to central bank interventions as a source of exchange rate movement, leading to a false "intervention explanation" for observed jumps.
langue originaleAnglais
journalQuantitative Finance
étatPublié - 2012

Empreinte digitale

Jump
Central bank intervention
Rumor
Exchange rates
Trigger
Central bank
Japan
Data base
Policy implications
Investors

Citer ceci

@article{76cf278393cc4712803534e6cfb6b113,
title = "Do Jumps mislead the FX market?",
abstract = "This paper investigates the link between jumps in the exchange rate process and rumors of central bank interventions. Using the case of Japan, we analyze specifically whether jumps trigger false reports of intervention (i.e. an intervention is reported when it did not occur). Intraday jumps are extracted using a non-parametric technique recently proposed by Lee and Mykland (2007) and by Andersen et al. (2007), and later modified in Boudt et al.(2008). Rumors are identified by using a unique database of Reuters and Dow Jones newswires. Our results suggest that a significant number of jumps on the YEN/USD have been falsely interpreted by the market as being the result of a central bank intervention. The paper has policy implications in terms of central bank interventions. We show that in times where the central bank is known to intervene, some investors may attach a lot of weight to central bank interventions as a source of exchange rate movement, leading to a false {"}intervention explanation{"} for observed jumps.",
author = "Christelle Lecourt and Jean-Yves Gnabo and J{\'e}r{\^o}me Lahaye and S{\'e}bastien Laurent",
year = "2012",
language = "English",
journal = "Quantitative Finance",
issn = "1469-7688",
publisher = "Routledge",

}

Do Jumps mislead the FX market? / Lecourt, Christelle; Gnabo, Jean-Yves; Lahaye, Jérôme; Laurent, Sébastien.

Dans: Quantitative Finance, 2012.

Résultats de recherche: Contribution à un journal/une revueArticle

TY - JOUR

T1 - Do Jumps mislead the FX market?

AU - Lecourt, Christelle

AU - Gnabo, Jean-Yves

AU - Lahaye, Jérôme

AU - Laurent, Sébastien

PY - 2012

Y1 - 2012

N2 - This paper investigates the link between jumps in the exchange rate process and rumors of central bank interventions. Using the case of Japan, we analyze specifically whether jumps trigger false reports of intervention (i.e. an intervention is reported when it did not occur). Intraday jumps are extracted using a non-parametric technique recently proposed by Lee and Mykland (2007) and by Andersen et al. (2007), and later modified in Boudt et al.(2008). Rumors are identified by using a unique database of Reuters and Dow Jones newswires. Our results suggest that a significant number of jumps on the YEN/USD have been falsely interpreted by the market as being the result of a central bank intervention. The paper has policy implications in terms of central bank interventions. We show that in times where the central bank is known to intervene, some investors may attach a lot of weight to central bank interventions as a source of exchange rate movement, leading to a false "intervention explanation" for observed jumps.

AB - This paper investigates the link between jumps in the exchange rate process and rumors of central bank interventions. Using the case of Japan, we analyze specifically whether jumps trigger false reports of intervention (i.e. an intervention is reported when it did not occur). Intraday jumps are extracted using a non-parametric technique recently proposed by Lee and Mykland (2007) and by Andersen et al. (2007), and later modified in Boudt et al.(2008). Rumors are identified by using a unique database of Reuters and Dow Jones newswires. Our results suggest that a significant number of jumps on the YEN/USD have been falsely interpreted by the market as being the result of a central bank intervention. The paper has policy implications in terms of central bank interventions. We show that in times where the central bank is known to intervene, some investors may attach a lot of weight to central bank interventions as a source of exchange rate movement, leading to a false "intervention explanation" for observed jumps.

M3 - Article

JO - Quantitative Finance

JF - Quantitative Finance

SN - 1469-7688

ER -