How is it possible that exchange rates move in the long run towards fundamentals, whileprofessionals form consistently irrational exchange rate expectations? We look at this puzzle from adifferent perspective by analyzing investor sentiment in the US-dollar market. First, long-horizonregressions...

Financial liberalisation has often failed in the past due to underestimated problems ofstructural change. We analyse such changes in lending behaviour of Thai commercialbanks during a liberalisation phase by way of unique micro data. Liberalisationhas expected positive effects, such as lowering...

This paper uses the framework of long-term financial system development to describe andassess the reform process in Thailand after 1997. The present financial reforms are well inline with the pattern of financial development found in the academic literature. A detailedanalysis of capital...

This paper makes three contributions to our understanding of the price discovery process in currencymarkets. First, it provides evidence that this process cannot be the familiar one based on adverse selectionand customer spreads, since such spreads are inversely related to a trade’s likely...

This study examines profits and speculation in the USD/EUR trading of a bank in Germanyover a four-month period. Dealing activity at the bank generates profits but speculation doesnot seem to contribute to this. We find that speculative positions fail to become profitablewithin a 30-minutes'...

The puzzling evidence of seemingly high momentum returns is related to an understanding ofrisk as a simple covariance. If we consider, however, risk in higher-order statistical moments,momentum returns appear less advantageous.

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...

Evidence from credit files is provided to examine bank lending determinants of Thaicommercial banks. Their lending practice follows reasonable patterns as a standardset of variables, including indirect risk variables, explains much of the variance in interestrate spread. Reflecting institutional...

This paper extends earlier studies on exchange rate expectations' formation by using newdata and adding information about forecasters' reliance on fundamental analysis for the firsttime. We replicate the conventional result of non rational expectations. Moreover, biases inexpectations are...

Our questionnaire survey finds that most fund managers rely on the strategies ofbuy-&-hold, momentum and contrarian trading. These strategies are typically appliedmutually. Their use is rooted in the attributes and beliefs of the respective fund managers:buy-&-hold traders behave fundamentally...