Price Discovery in Currency Markets: Evidence from Three Emerging Markets

  •  Maria E. de Boyrie    
  •  Ivelina Pavlova    
  •  A. M. Parhizgari    


This study investigates the price discovery role of the spot and the futures markets for the Brazilian real, South African rand and Russian ruble. Three methodologies are employed: open-end multiple structural analyses, vector error correction model, and reduced form computation of the information shares. Within the full period of the data sample, three non-overlapping sub-periods are identified and analyzed. The findings indicate that while the futures market has a more prominent role in price discovery for the Brazilian real, the spot market has a leading position in the Russian ruble. The South African rand results are mixed. Further, the estimated short-run lead-lag results suggest that in general the dynamics of the three emerging currency markets are not the same.

This work is licensed under a Creative Commons Attribution 4.0 License.