Risk–return relationships in foreign-currency futures following macroeconomic announcements
✍ Scribed by Li-Ming Han; Onem Ozocak
- Book ID
- 102217859
- Publisher
- John Wiley and Sons
- Year
- 2002
- Tongue
- English
- Weight
- 217 KB
- Volume
- 22
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
✦ Synopsis
Abstract
This study uses the tick data for foreign‐currency futures to examine risk–return relationships on
macroeconomic announcements. This study—different from previous studies—examines the risk–return
relationship by capturing the announcement effect on returns with announcement surprises and on volatilities with
announcement dummies simultaneously in a Generalized Autoregressive Conditional Heteroskedasticity
(GARCH) model. Strong risk–return relationships are detected for the first min after the
announcements. Furthermore, the return–risk tradeoff ratios differ across currencies and across
macroeconomic indicators. The same information can be more profitable when acted on the more liquid currency
futures. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22: 729–764, 2002