Working Paper: NBER ID: w2703
Authors: Takatoshi Ito; V. Vance Roley
Abstract: Intraday movements in the yen/dollar rate are examined over the 1980-86 period using opening and closing quotes in the New York and Tokyo markets. The results indicate that random-walk behavior is violated about half of the time in various subsamples. However, the economic significance of departures from the random-walk model diminishes over time. Large jumps in the exchange rate also are examined, and some evidence on subsequent mean reversion is presented. Finally, the response of Japanese and U.S. stock prices suggests that intraday yen/dollar rate movements do contain at least some relevant information.
Keywords: exchange rates; intraday movements; predictability; information content
JEL Codes: F31; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| large jumps (C55) | price corrections (D43) |
| yendollar rate movements (F31) | U.S. and Japanese stock prices (N22) |
| interest rate differentials (E43) | exchange rate predictability (F31) |