Informativeness of the Trade Size in an Electronic Foreign Exchange Market

Nikola Gradojevic

No 2014-ACF-02, Working Papers from IESEG School of Management

Abstract: This article studies a trading strategy that relies on private information in an electronic spot foreign exchange market. The framework is a high-frequency extension of a structural microstructure model by Easley et al. (1996). The results relate the informational content of trading to the trade size and suggest that the probability of the informed large trading is significantly higher than the probability of uninformed large trading.

Keywords: Foreign Exchange Market; Market Microstructure; Order Flow; Frequency-domain; Causality (search for similar items in EconPapers)
JEL-codes: F3 G0 G1 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2014-03
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