End-user order flow and exchange rate dynamics - a dealer's perspective

Stefan Reitz, Markus Schmidt and Mark Taylor

The European Journal of Finance, 2011, vol. 17, issue 2, 153-168

Abstract: This paper empirically investigates the Evans and Lyons' [2002. Understanding order flow. International Journal of Finance and Economics 11: 3-23] model of the foreign exchange market from a dealer's perspective. We provide evidence of the suggested information aggregation process using a rich database on a German bank's end-user order flow from 2002 to 2003. Although customer order flow is unambiguously the vehicle incorporating non-public information into exchange rates over time, our empirical analysis does not support the idea that customer order flow is a high-powered source of information easily exploitable for short-run speculation.

Keywords: foreign exchange; market microstructure; end-user order flow (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (5)

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DOI: 10.1080/13518471003651925

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