Abstract
The dramatic yen/dollar volatility of 1998 has been popularly ascribed to order flow driven by changing tastes for risk and hedge-fund herding on unwinding yen 'carry trade' positions rather than fundamentals. High-frequency evidence of shifting fundamentals is provided by a comprehensive list of macroeconomic announcements. News is found to have significant effects on volatility, but order flow may play a more important role. Since portfolio shifts are revealed to the market through trading, the results are consistent with order flow playing a significant role in the revelation of private information and associated exchange rate shifts. Copyright © 2001 Elsevier Science Ltd.
| Original language | English |
|---|---|
| Pages (from-to) | 327-347 |
| Journal | Journal of International Money and Finance |
| Volume | 20 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - Jun 2001 |
Citation
Cai, J., Cheung, Y.-L., Lee, R. S. K., & Melvin, M. (2001). 'Once-in-a-generation' yen volatility in 1998: Fundamentals, intervention, and order flow. Journal of International Money and Finance, 20(3), 327-347.Keywords
- Exchange rate volatility
- Private information
- Order flow
- News announcements
- Central bank intervention