Tick test accuracy in foreign exchange ECN markets

Walid Ben Omrane and Robert Welch

Research in International Business and Finance, 2016, vol. 37, issue C, 135-152

Abstract: Recent computer quoting activity has increased the allure of the tick test because the quote rule and its variants require matching asynchronous trade and quote records. We find tick test accuracy of 1.2 million forex trades is about 67% which falls to 63% for zerotick trades (half the sample). Accuracy declines as quoted spreads decrease and as time to the previous trade increases. We observe extreme asymmetry for midquote changes, where buyer accuracy is 96% (27%) for up (down) changes, respectively. The quote rule is about 77% accurate. The group tick test is superior to the bulk volume classification method.

Keywords: Tick rule; Signed trades; Foreign exchange ECN market; High-frequency data (search for similar items in EconPapers)
JEL-codes: F31 G10 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:37:y:2016:i:c:p:135-152

DOI: 10.1016/j.ribaf.2015.10.001

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