Private information in currency markets

• 成果类型: Article
• 署名作者: Michaelides, Alexander; Milidonis, Andreas; Nishiotis, George P.
• 署名单位: Imperial College London; University of Cyprus
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2018.08.012
• 发表日期: 2019
• 页码: 643-665
• 关键词: Sovereign debt ratings; Foreign exchange; institutional quality; Information leakage; TRMI

摘要

Using daily abnormal currency returns for the universe of countries with flexible exchange rates, we show local currency depreciations ahead of unscheduled, public sovereign debt downgrade announcements. Consistent with the private information hypothesis, the effect is stronger in lower institutional quality countries and holds after we control for concurrent public information and for publicly available rumors about the forthcoming downgrades. Our results persist when abnormal currency returns are adjusted for global carry and dollar risk factors, world equity and bond returns, as well as local stock market returns. Finally, the currency depreciations are permanent, providing evidence for a link between fundamentals and currency markets. (C) 2018 Elsevier B.V. All rights reserved.