The Role and Magnitude of Order Flows in Seoul Foreign Market

Chae-Shick Chung ()
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Chae-Shick Chung: Sogang University

East Asian Economic Review, 2010, vol. 14, issue 1, 237-260

Abstract: In this paper, we test the role of order flows in KRW/USD. We use transaction based high frequency data (electronic broker) happened in 2006. For robustness check, we extend our analysis by combining exchange rates (indicative quotes v.s. transaction rate), frequency (transaction based time v.s. 1 minute through 1 day), and order flows (sign v.s. signed volume). The results show that order flow is an important variable for explaining the KRW/USD regardless of frequency and of choice of quotes. Based on Hasbrouck's measure we find that 14-28% of permanent exchange rate variation is due to private information. The magnitude is smaller than that of international currency presenting, for example, in Payne (2003). The discrepancy arises both from currency choice and from too short data span in Payne (2003).

Keywords: Indicative Quote; KRW/USD; Market Microstructure; Order Flow (search for similar items in EconPapers)
JEL-codes: F30 G12 G14 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ris:eaerev:0112

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