|Currency Jumps, Cojumps and Trading Profits: Role of Macroeconomic Announcements
Hong Miao, Colorado State University, Department of Finance and Real Estate
Monday,November 14, 2011
4:00 p.m., room 223, Weber Bldg
The talk examines the relationship between currency jumps and scheduled macro news announcements, and tests the profitability of a trading rule that incorporates information about the direction of the economic surprise. Several important results emerge. First, using a 5-minute sampling frequency, we find that about 9-15% of jumps can be linked to U.S. announcements. Second, U.S. news releases at 8:30 am are among the most influential set of economic announcements. Third, evidence from co jump statistics suggests closer dependencies among European currencies. Finally, a 5-minute trading rule which requires taking long and short positions in currency futures produces substantial excess returns. The necessary background and data sets will be introduced at the beginning of the talk.