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On the sources of private information in FX markets
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Moore, Michael J. and Payne, Richard (2011) On the sources of private information in FX markets. Journal of Banking & Finance, Volume 35 (Number 5). pp. 1250-1262. doi:10.1016/j.jbankfin.2010.10.013 ISSN 0378-4266.
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Official URL: http://dx.doi.org/10.1016/j.jbankfin.2010.10.013
Abstract
We investigate the source of information advantage in inter-dealer FX trading using data on trades and counter-party identities. In liquid dollar exchange rates, information is concentrated among dealers that trade most frequently and specialize their activity in a particular rate. In cross-rates, traders that engage in triangular arbitrage are best informed. Better-informed traders are also located on larger trading floors. In cross-rates, the ability to forecast flows explains all of the advantage of the triangular arbitrageurs. In liquid dollar rates, specialist traders can forecast both order-flow and the component of exchange rate changes that is uncorrelated with flow.
| Item Type: | Journal Article | ||||
|---|---|---|---|---|---|
| Divisions: | Faculty of Social Sciences > Warwick Business School | ||||
| Journal or Publication Title: | Journal of Banking & Finance | ||||
| Publisher: | Elsevier Science BV | ||||
| ISSN: | 0378-4266 | ||||
| Official Date: | May 2011 | ||||
| Dates: |
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| Volume: | Volume 35 | ||||
| Number: | Number 5 | ||||
| Number of Pages: | 12 | ||||
| Page Range: | pp. 1250-1262 | ||||
| DOI: | 10.1016/j.jbankfin.2010.10.013 | ||||
| Status: | Peer Reviewed | ||||
| Publication Status: | Published | ||||
| Access rights to Published version: | Restricted or Subscription Access |
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