How do UK-based foreign exchange dealers think their market operates?

Yin-Wong Cheung, Menzie Chinn and Ian Marsh ()

International Journal of Finance & Economics, 2004, vol. 9, issue 4, 289-306

Abstract: This paper summarizes the results of a survey of UK-based foreign exchange dealers conducted in 1998. It addresses topics in three main areas: the microeconomic operation of the foreign exchange market; the beliefs of dealers regarding the importance, or otherwise, of observable macroeconomic fundamental factors in affecting exchange rates; microstructure factors in FX. We find that heterogeneity of traders' beliefs is evident from the results but that it is not possible to explain such disagreements in terms of institutional detail, rank or trading technique (e.g. technical analysts versus fundamentalists). As expected, non-observable fundamental factors are thought to dominate short horizon changes in exchange rates, but observable fundamentals are deemed important over much shorter horizons than the mainstream empirical literature would suggest. Finally, market 'norms' and behavioural phenomena are very strong in the FX market and appear to be key determinants of the bid-ask spread. Copyright © 2004 John Wiley & Sons, Ltd.

Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (99)

Downloads: (external link)
http://hdl.handle.net/10.1002/ijfe.252 Link to full text; subscription required (text/html)

Related works:
Working Paper: How Do UK-Based Foreign Exchange Dealers Think Their Market Operates? (2000)
Working Paper: How Do UK-Based Foreign Exchange Dealers Think Their Market Operates? (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijf:ijfiec:v:9:y:2004:i:4:p:289-306

Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307

DOI: 10.1002/ijfe.252

Access Statistics for this article

International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().