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The Power of the Euro–Sterling Rates in Explaining Asset Market Rates: A High‐frequency Analysis
Author(s) -
Laganà Gianluca
Publication year - 2008
Publication title -
economic notes
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.274
H-Index - 19
eISSN - 1468-0300
pISSN - 0391-5026
DOI - 10.1111/j.1468-0300.2008.00196.x
Subject(s) - asset (computer security) , economics , interest rate , econometrics , market power , value (mathematics) , financial economics , monetary economics , microeconomics , computer science , mathematics , statistics , computer security , monopoly
This article makes use of high‐frequency asset market data to explain unexpected changes in interest rates using the methodology proposed by Cochrane and Piazzesi (2002) . This work departs from the existing literature because it uses UK market expectations to capture unexpected movements in the base rate, and explores its effect on a large number of asset market variables. Results indicate that the relation between asset market data and unexpected base rate changes is stronger and more consistent than the relation between asset market data and raw base rate changes. Results appear to be robust to extreme value changes.