Hi,
Trading forex based on news events - what's your take on it? I'll set the scene.
Semistrong-form efficient market theory asserts that prices adjust rapidly to the release of all public information; that is, prices fully reflect all public information.
Studies have tested the theory... allow me to quote...
"Unexpected World Events and Economic News.
The results of several studies that examined the response of prices to world or economic news have supported efficient market hypothesis (EMH). An analysis of the reaction of prices to unexpected events, such as Eisenhower's heart attack, Kennedy assassination, military events, found that prices adjsuted to the news before the market opened or before it reopened after the annoucement (generally, as with the world trade centre attack, the exchanges are closed immediately for various time periods - eg. one to four days).
A study examined the response to announcements about money supply, inflation, real economic activity, and discount rate found an impact that did not persist beyond the annoucenemnt day. Finally, Jain did an analysis of hourly returns and trade volume response to surprise announcements and found that unexpected information about money supply impacted stock prices within one hour."
Sorry that's a bit on the long side.
So my thoughts here are that, certainly markets are at least pretty efficient - prices do adjust rapidly. But would we all agree that the adjustment is not instantaneous, there must be a period, however short, whereby traders can take advantage?
As to the prospect of markets temporarily closing in the face of truly monumental events (9/11 for example), I do not how that process works, and would be interested to hear if anyone could explain that.
Furthermore, do you believe that reuters/Thomson and other services provide the data fast enough to "get in early" ?
I also acknowledge that the impact of such news events may be open to interpretation.
Essentially my question is this: If you sit infront of a computer screen with a live data feed, awaiting significant news events, do you believe you can profit, over the long run, by reacting rapidly?
Thanks for discussion.
Trading forex based on news events - what's your take on it? I'll set the scene.
Semistrong-form efficient market theory asserts that prices adjust rapidly to the release of all public information; that is, prices fully reflect all public information.
Studies have tested the theory... allow me to quote...
"Unexpected World Events and Economic News.
The results of several studies that examined the response of prices to world or economic news have supported efficient market hypothesis (EMH). An analysis of the reaction of prices to unexpected events, such as Eisenhower's heart attack, Kennedy assassination, military events, found that prices adjsuted to the news before the market opened or before it reopened after the annoucement (generally, as with the world trade centre attack, the exchanges are closed immediately for various time periods - eg. one to four days).
A study examined the response to announcements about money supply, inflation, real economic activity, and discount rate found an impact that did not persist beyond the annoucenemnt day. Finally, Jain did an analysis of hourly returns and trade volume response to surprise announcements and found that unexpected information about money supply impacted stock prices within one hour."
Sorry that's a bit on the long side.
So my thoughts here are that, certainly markets are at least pretty efficient - prices do adjust rapidly. But would we all agree that the adjustment is not instantaneous, there must be a period, however short, whereby traders can take advantage?
As to the prospect of markets temporarily closing in the face of truly monumental events (9/11 for example), I do not how that process works, and would be interested to hear if anyone could explain that.
Furthermore, do you believe that reuters/Thomson and other services provide the data fast enough to "get in early" ?
I also acknowledge that the impact of such news events may be open to interpretation.
Essentially my question is this: If you sit infront of a computer screen with a live data feed, awaiting significant news events, do you believe you can profit, over the long run, by reacting rapidly?
Thanks for discussion.
