Information Surprises and Cross-Border Capital Flows: Evidence from Foreign Exchange, Gold, and Digital Asset Markets

Abstract

This paper examines how extreme information shocks influence post-event price dynamics across eight internationally traded instruments: five major foreign exchange pairs (EURUSD, USDJPY, GBPUSD, USDCNY, and USDINR), gold, Bitcoin, and Ethereum. Using daily data from February 2018 through December 2025, information surprises are identified through a rolling-volatility standardized return approach, and cumulative abnormal returns (CARs) are tracked over a 30-day post-shock window. The empirical design extends the event-study logic of Bush, Mehdian, and Perry (2010) to a cross-asset international finance setting and evaluates post-shock adjustment patterns against three theoretical benchmarks: the Efficient Market Hypothesis, the overreaction hypothesis, and the Uncertain Information Hypothesis. Results indicate that informational efficiency is conditional rather than uniform across asset classes. Major foreign exchange pairs, particularly EURUSD, display relatively muted post-shock CARs consistent with faster information absorption. Gold behaves as an uncertainty-sensitive asset, with post-shock dynamics more consistent with gradual investor repositioning than immediate price discovery. Digital assets show the largest and least stable post-shock adjustments, with Bitcoin exhibiting statistically significant delayed positive drift following positive shocks and Ethereum showing early-window reversal behavior following positive shocks, though several Ethereum and Bitcoin results do not achieve conventional significance levels. These findings suggest that information shocks propagate differently across traditional currency channels, safe-haven assets, and cryptocurrency markets, with implications for portfolio management, risk hedging, and the assessment of market efficiency in globally integrated financial systems.