Since 2014
Price Discovery in Brazilian FX Markets
Brazilian Review of Econometrics
View Archive Info| Field | Value | |
| Title |
Price Discovery in Brazilian FX Markets
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| Creator |
Santos, Francisco Luna; Instituto de Pesquisa Econômica Aplicada
Garcia, Márcio Gomes Pinto; Pontifícia Universidade Católica do Rio de Janeiro Medeiros, Marcelo Cunha; Pontifícia Universidade Católica do Rio de Janeiro |
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| Subject |
Price discovery, exchange rate, efficiency, arbitrage, derivatives.
C58, F31, G14, G28 |
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| Description |
We study price discovery in the Brazilian Foreign Exchange (FX) markets and indicate which market (spot or futures) adjusts more quickly to the arrival of new information. We find that futures market dominates price discovery since it responds for 66.2% of the variation in the fundamental price shock and for 97.4% of the fundamental price composition, corroborating the result provided in previous studies that, in a unique world example, the exchange rate is formed in the futures market. In a dynamic perspective, the futures market is also more efficient since, when markets are subjected to a shock in the fundamental price, it is faster to recover to equilibrium. By computing price discovery according to calendar semesters, we find evidence of the correlation between price discovery metrics and market factors, such as spot market supply-demand disequilibrium, central bank interventions and institutional investors’ pressure.
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| Publisher |
Sociedade Brasileira de Econometria
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| Contributor |
CNPq, Faperj, Anbima.
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| Date |
2015-04-14
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion — — |
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| Format |
application/pdf
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| Identifier |
http://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/46423
10.12660/bre.v35n12015.46423 |
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| Source |
Brazilian Review of Econometrics; Vol 35, No 1 (2015); 65-94
Brazilian Review of Econometrics; Vol 35, No 1 (2015); 65-94 1980-2447 |
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| Language |
eng
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| Relation |
http://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/46423/47093
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| Rights |
Copyright (c) 2015 Brazilian Review of Econometrics
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