Microstructure of the EUR/PLN Market: Implications for Investors’ Behavior

Radosław Cholewiński (), Stanisław Kluza () and Andrzej Sławiński ()
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Radosław Cholewiński: Senior Economist, BRE Bank, Warsaw, Poland
Stanisław Kluza: Warsaw School of Economics, Poland
Andrzej Sławiński: Warsaw School of Economics, Poland

Chapter 1 in FindEcon Monograph Series: Advances in Financial Market Analysis, 2010, vol. 8, pp 13-26 from University of Lodz

Abstract: In the first chapter Cholewiński, Kluza and Sławiński investigated a microstructure of the EUR/PLN market. The authors extended the order flow analysis for the EUR/PLN market conducted in the previous works of Kluza and Sławiński. They focused on tick rather than daily data. This facilitated to consider a much longer time span comprising the entire period after Poland’s EU accession. The analysis has shown that exchange rates initially overreacted to order flows. Then the overshooting diminished over the next few trades. However, an arbitrage possibility by playing on the overshooting correction proved not to be profitable. The reason is that making use of statistical properties of the FX market causes an exchange rate movement that eliminates the arbitrage possibility.

Keywords: Market microstructure; Investors’ behavior; EUR/PLN exchange rate (search for similar items in EconPapers)
JEL-codes: C01 E02 F00 G00 (search for similar items in EconPapers)
Date: 2010
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