2003 Fiscal Year Final Research Report Summary
A Research on Microstructure of Foreign Exchange Market with High Frequency Data
| Project/Area Number |
12630105
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Public finance/Monetary economics
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| Research Institution | Nagasaki University |
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Principal Investigator |
SUSAI Msayuki Nagasaki University, Economics, Professor, 経済学部, 教授 (40206454)
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| Co-Investigator(Kenkyū-buntansha) |
KAWASAKI Yoshinori The Institute of Statistical Mathematics, Department of Prediction and Control, Assistant Professor, 予測制御研究系, 助手 (70249910)
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| Project Period (FY) |
2000 – 2003
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| Keywords | GARCH Model / Market Efficiency / Public Effect / Microstructure Approach / Ultra High Frequency Data |
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| Research Abstract |
In this research, we explore the microstructure of foreign exchange market, especially yen/dollar market, with high frequency yen/dollar data (UHFD). With the analysis of the effect of information inflow into the yen/dollar market on the volatility of yen/dollar rate, we examine the microstructure of yen/dollar market.
In doing our research, we use two kinds of information, one is the announcement of major economic Indices and the other is the information which is used by FX dealer in their dealing. We establish the latter data in the way below. We count the number of the tick in a given time period and we use this number as the approximation.
The announcement of economic Indices can affect on the volatility and tick interval just after the announcement. Especially price indices can only affect on tick interval.
With the UHFD, we use GARCH model to investigate the effect of information inflow on FX volatility. The estimation results show the information being used by dealers affect the volatility of FX significantly. This means the GARCH effect is partly caused by information inflow into market. After the reduction of the day of the week effect and time effect, we also find the significant same result as above. Hereby, we can say some of the market microstructural volatility pattern is produced by information inflow.
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