Roodbar, B. and Metcalf, H. and Casalin, F (2019) 'Trading European Central Bank rumours on the EUR-USD exchange rate market.', International review of financial analysis., 61 . pp. 53-70.
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.
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|Publisher Web site:||https://doi.org/10.1016/j.irfa.2018.11.001|
|Publisher statement:||© 2019 This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/|
|Record Created:||04 Sep 2019 14:28|
|Last Modified:||04 Sep 2019 15:17|
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