Local Information in Foreign Exchange Markets

This study shows that order flow in a foreign exchange market only has permanent price impact if itcomes from certain regions. These regions are – as predicted by the local information hypothesis –centers of political and financial decision making. It is revealing that orders from other regions onlyshow a very short-lived but no permanent price impact.[...]

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Year of publication:	2006-04-01
Authors:	Menkhoff, Lukas ; Schmeling, Maik
Institutions:	Universität <Hannover> / Wirtschaftswissenschaftliche Fakultät
Subject:	Preis \| Information \| information \| Hypothese \| Einfluss \| Impact

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1 Introduction
2 Market structure, data, and descriptive statistics
2.1 Market structure and dealing system
2.2 Data
2.3 Descriptive statistics
2.4 Characteristics of regions
3 Price impact of regional groups
3.1 Econometric approach
3.2 Reduced form VARs
3.3 Structural VAR analysis, common news shocks and feedback trading
4 Conclusions
References

Persistent link: https://www.econbiz.de/10005867509