Tests of Microstructural Hypotheses in the Foreign Exchange Market
Richard Lyons ()
No RPF-230, Research Program in Finance Working Papers from University of California at Berkeley
This paper introduces a three-part transactions dataset to test various microstructural hypotheses about the spot foreign exchange market. In particular, we test for effects of trading volume on quoted prices through the two channels stressed in the literature: the information channel and the inventory-control channel. We find that trades have both a strong information effect and a strong inventory-control effect, providing support for both strands of microstructure theory. The bulk of equity-market studies also find an information effect; however, these studies typically interpret this as evidence of inside information. Since there are no insiders in the foreign exchange market, this finding suggests a broader conception of the information environment, at least in this context.
References: Add references at CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Journal Article: Tests of microstructural hypotheses in the foreign exchange market (1995)
Working Paper: Tests of Microstructural Hypotheses in the Foreign Exchange Market (1993)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ucb:calbrf:rpf-230
Ordering information: This working paper can be ordered from
IBER, F502 Haas Building, University of California at Berkeley, Berkeley CA 94720-1922
Access Statistics for this paper
More papers in Research Program in Finance Working Papers from University of California at Berkeley University of California at Berkeley, Berkeley, CA USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().