EconPapers    
Economics at your fingertips  
 

Foreign Exchange Volume: Sound and Fury Signifying Nothing?

Richard Lyons ()

No RPF-243, Research Program in Finance Working Papers from University of California at Berkeley

Abstract: This paper examines whether currency trading volume is informative, and under what circumstances. Specifically, we use transactions data to test whether trades occurring when trading intensity is high are more informative -- dollar for dollar -- than trades occurring when intensity is low. Theory admits both possibilities, depending primarily on the posited information structure. We present what we call a hot-potato model of currency trading, which explains why low-intensity trades might be more informative. In the model, the wave of inventory-management trading among dealers following innovations in order flow generates an inverse relationship between intensity and information content. Empirically, low-intensity trades are more informative, supporting the hot-potato hypothesis.

Date: 1995-01-01
References: Add references at CitEc
Citations: View citations in EconPapers (15) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Chapter: Foreign Exchange Volume: Sound and Fury Signifying Nothing? (1996) Downloads
Working Paper: Foreign Exchange Volume: Sound and Fury Signifying Nothing? (1995) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucb:calbrf:rpf-243

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 ().

 
Page updated 2020-07-08
Handle: RePEc:ucb:calbrf:rpf-243