Price Discovery on Foreign Exchange Markets with Differentially Informed Traders

Frank de Jong (), Ronald Mahieu, Peter Schotman and Irma van Leeuwen
Additional contact information
Frank de Jong: University of Amsterdam and CEPR
Peter Schotman: Limburg Institute of Financial Economics, Maastricht University, and CEPR
Irma van Leeuwen: Limburg Institute of Financial Economics, Maastricht University

No 99-032/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper uses Reuters exchange rate data to investigate thecontributions to the price discovery process by individual banks in theforeign exchange market. We propose multivariate time series models aswell as models in tick time to study the dynamic relations between thequotes of individual banks. We investigate the hypothesis that Germanbanks are price leaders in the deutschmark/dollar market. Our empiricalresults suggest an important but not exclusive role for German banks inthe price discovery process. There is also a group of banks, German andnon-German, that lags behind the market and does not contribute to theprice discovery process. In contrast to Peiers~(1997) we do not findevidence for stronger price leadership of Deutsche bank on days withsuspected Bundesbank interventions in the foreign exchange market.

Keywords: exchange rates; moment estimators; high frequency data; microstructure (search for similar items in EconPapers)
JEL-codes: C32 F31 (search for similar items in EconPapers)
Date: 1999-05-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Price Discovery on Foreign Exchange Markets with Differentially Informed Traders (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:19990032

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