台灣外匯匯率制度從一開始採固定匯率制度，以新台幣釘住美元，經歷釘住美元機動匯率制度，之後外匯制度逐漸改革，在1991年1月30日起改為管理浮動匯率，使外匯制度更自由化。像銀行間即期美元交易價格不再有上、下限之限制，交易價格完全自由化。也因為外匯台幣對美元更自由化，希望了解台幣對美元匯率的價格波動，就近是何種原因資訊造成的。

台灣外匯市市場波動並不是因為公開資訊的原因，總體經濟宣告的比率增加並無使的波動性增加；在總體經濟宣告發布當時，報酬變異數雖然高過於一般時間的報酬變異數，但是在收盤前的高報酬變異數卻不是公開資訊發布的時間，因此這說明了波動性的出現原因並非公開訊所導致的。如果非公開資訊影響外匯波動，那私有資訊就有可能成為影響波動主要原因。結果發現如下：

1 交易時間波動性顯著大於非交易時間波動性，顯示[交易訊息效果]存在。並且也說明的市場上不只有公開資訊，因為再有效率的市場，資訊價格已經反應所有的公開資訊，所以公開資訊並不會影響價格波動，所以使資產價格波動是因為私有資訊。

2 交易時間增加，使得內部交易者不急著交易因而分散交易波動性。

3 尾盤波動性增加，是因為私有資訊產生，可能在非交易期間衰竭為公開資訊，因此消息靈通者會在收盤前進行交易。

從以上的結論我們可以發現台灣外匯市場中私有資訊所扮演的重要角色，私有資訊才是造成外匯波動大幅增加的主因。

In the early stage, the fixed exchange rate policy was established in Taiwan, with focus on the exchange of NT Dollar to US dollar. After undergoing the changes of flexible exchange rate system, the regulation of exchange rate gradually renovates. On January 30, 1991, the exchange rate system changed to a managed floating system that allows the exchange rate to be more liberal. The spot USD trading price is no longer restricted by the upper or lower limit among banks, and the negotiation of trading price is completely free. As the exchange for NTD to USD becomes more liberal, the issue of the factors behind the price fluctuation on NTD to USD has become an interesting subject to study.

This paper investigates Taiwan’s foreign exchange market in order to discover the factors that cause the price volatility, whether it is private information or macroeconomic news announcement of public information. This study examines the exchange rate occurred every 15 minutes during January 5, 1992 to November 27, 2001. Given the result that the increase of macroeconomic news announcement does not increase the volatility, the volatility in Taiwan’s foreign exchange market is mainly caused by private information, not public information. Although the return variance is comparatively higher than the return variance in other normal time period during the macroeconomic news announcement, the highest return variance before the trade close does not occur at the time of public news announcement. It represents that the occurrence of volatility is not affected by the macroeconomic news announcement. If foreign exchange volatility is not affected by macroeconomic news announcement of public information, then private information might be the major factor affecting the price volatility. The findings are as follows:
1. The volatility in trading period is much higher than the volatility in non-trading period, demonstrating the existence of “exchange message effectiveness”. Meanwhile, it also states that public information is not the only information existing in the market. Even at the most efficient market, the informative pricing has reflected all the public information. The macroeconomic news announcement of public information would not affect the price volatility, the asset pricing volatility is affected by the private information.

2. Trading time become longer which makes the informed trader not necessary to trade in a hurry, diverging the volatility of transaction.

3. The volatility at closing period increases because of the occurrence of private information. It may downgrade to public information during non-trading period. People holding valuable private information would trade before the market is close.

Concluded from above, it can be discovered that the private information has played an important role incurring the large volatility in Taiwan’s foreign exchange market.

CONTENTS


CHAPTER 1 INTRODUCTION 4
1.1 Motivation 4
1.2 Research Objective 5
1.3 Introduction of our Foreign Exchange Market 6
Chapter One: The Characteristics of Our Foreign Exchange Market 8
Chapter Two: The Framework of Taiwan’s Foreign Exchange Market 9
Chapter Three: The Operation of Our Foreign Exchange Market 10
1.4 Research Framework 11

CHAPTER 2 LITERATURE REVIEW 13
2.1 Public Information: 13
2.1.1Macroeconomics news announcement 13
2.1.2 Government Intervention 16
2.2 Private information 17
2.2.1 Return Variance 19
2.2.2 Intraday Volatility 20
2.2.3 Long/Short lived private information 22
2.3 Conclusion of Literature Review 25
2.3.1 Public Information 25
2.3.2 Private Information 25

CHAPTER 3 RESEARCH DESIGN 27
3.1 Data 27
3.1.1Research Period 27
3.1.2 Data Source and Management 27
3.1.3 Data Source 27
3.2 Research Approach 33
3.2.1Effect of Public Information on Volatility 33
3.2.2 Effect of Private Information on Volatility 34
3.2.2.1. Hypothesis 1: 35
3.2.2.2 Hypothesis 2 and 3: 40
3.2.2.3. Hypothesis 4: 42
3.2.2.4. Hypothesis 5: 43


CHAPTER 4 EMPIRICAL RESULT ANALYSIS 45
4.1 Public information V. S Foreign exchange rate Volatility 45
4.2 Private information vs. foreign exchange volatility 51
4.2.1. Hypothesis 1 results: Comparison of trading and
non-trading volatility 51
4.2.2. Hypothesis 2 results: Monday to Friday intraday
volatility pattern 57
4.2.3. Hypothesis 3 results: Saturday intrady volatility pattern 61
4.2.3. Hypothesis 4 results: Monday to Friday and Saturday
intraday volatility pattern 64
4.2.5. Hypothesis 5 results: Comparison of Monday to Friday intraday and Saturday intraday volatility pattern 65
4.3 Conclusion of Empirical Analysis 66
4.3.1. Public information 66
4.3.2. Private information 67

CHAPTER 5 CONCLUSION 68
5.1 Concluding Remarks 68
5.2 Limitation and Future Research 70

APPENDIX 71
REFERENCE 74


FIGURE CONTENT


Figure 1 The Framework of Taiwan Exchange Market 9
Figure 2 Thesis Framework 12
Figure 3 Interday return volatility 46
Figure 4 Monday intraday return Volatility pattern 49
Figure 5 Tuesday intraday return Volatility pattern 49
Figure 6 Wednesday intraday return Volatility pattern 49
Figure 7 Thursday intraday return Volatility pattern 50
Figure 8 Friday intraday return Volatility pattern 50
Figure 9 Saturday intraday return Volatility pattern 50
Figure10 Monday to Friday intraday mean return 60
Figure11 Monday to Friday intraday volatility pattern 60
Figure12 Monday to Friday intraday standard deviation volatility pattern 60
Figure 13 Saturday intraday mean return 63
Figure 14 Saturday intraday volatility pattern 63
Figure 15 Saturday intraday standard deviation volatility pattern 63
Figure 16 Intraday volatility :Monday to Friday and Saturday 65


TABLE CONTENT


Table 1 The release day of major Taiwan macroeconomic news
Announcement 45
Table 2 Daily(open-to-close) total return variance 46
Table3 Hourly intraday trading period to lunch-hour non-trading
period variance ratio 52
Table 4 Hourly intraday trading period to overnight non-trading
period variance ratio 53
Table 5 Hourly weekday trading period to weekend non-trading
period variance ratio(Saturday close to Monday open) 54
Table 6 Hourly weekday trading period to weekend non-trading
period variance ratio(Friday close to Monday open) 55
Table 7 Hourly trading to non-trading variance ratio 56

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