Information flows in foreign exchange markets: dissecting customer currency trades

Lukas Mankhoff, Lucio Sarno, Maik Schmeling and Andreas Schrimpf

No 405, BIS Working Papers from Bank for International Settlements

Abstract: We study the information in order flows in the world's largest over-the-counter market, the foreign exchange market. The analysis draws on a data set covering a broad cross-section of currencies and different customer segments of foreign exchange end-users. The results suggest that order flows are highly informative about future exchange rates and provide significant economic value. We also find that different customer groups can share risk with each other effectively through the intermediation of a large dealer, and differ markedly in their predictive ability, trading styles, and risk exposure.

Keywords: Order flow; foreign exchange risk premia; heterogeneous information; carry trades (search for similar items in EconPapers)
Pages: 89 pages
Date: 2013-03
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Information Flows in Foreign Exchange Markets: Dissecting Customer Currency Trades (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:405

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