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Deutsche Bundesbank, Forschungszentrum, Frankfurt am Main >
Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank >
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http://hdl.handle.net/10419/19682
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| Title: | | End-user order flow and exchange rate dynamics  |
| Authors: | | Taylor, Mark P. Schmidt, Markus Reitz, Stefan |
| Issue Date: | | 2007 |
| Series/Report no.: | | Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2007,05 |
| Abstract: | | In this paper we provide evidence for Evans and Lyons' (2005b) model of an information aggregation process in FX markets using a German bank's end-user order flow from 2002 to 2003. Though customer order flow is unambiguously the vehicle incorporating non-public information into exchange rates over time, our empirical analysis does not support the widespread optimism in the market microstructure literature that customer order flow is the high-powered source of information easily exploitable for short-run speculation. Moreover, commercial customers' order flow produces negative coefficients in contemporaneous return regressions, stressing their role as liquidity providers. |
| Subjects: | | Foreign exchange market microstructure end-user order flow |
| JEL: | | F31 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank
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