English, Article, Journal or magazine article edition: Profitability in an electronic foreign exchange market: informed trading or differences in valuation? Ramazan Gencay; Nikola Gradojevic; Faruk Selcuk

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Bookmark: http://trove.nla.gov.au/version/25462
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Profitability in an electronic foreign exchange market: informed trading or differences in valuation?
Author
  • Ramazan Gencay
  • Nikola Gradojevic
  • Faruk Selcuk
Physical Description
  • preprint
Notes
  • Fundamental spot exchange rate models preclude the existence of asymmetric information in foreign exchange markets. This article critically investigates the possibility that private information arises in the spot foreign exchange market. Using a rich dataset, we first empirically detect transaction behavior consistent with the informed trading hypothesis. We then work within the theoretical framework of a high-frequency version of a structural microstructure trade model, which directly measures the market maker’s beliefs. We find that the time-varying pattern of the probability of informed trading is rooted in the strategic arrival of informed traders on a particular hour-of-day, day-of-week, or geographic location (market)
  • Foreign Exchange Markets; Volume; Informed Trading; Noise Trading
  • RePEc:rim:rimwps:wp25_09
Language
  • English
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