Is There Private Information in the FX Market? The Tokyo Experiment

Takatoshi Ito (), Richard Lyons () and Michael T. Melvin

Working Papers from University of California at Berkeley, Haas School of Business

Abstract: It is a common view that private information in the foreign exchange market does not exist. We provide evidence against this view. The evidence comes from the introduction of trading in Tokyo over the lunch hour. Lunch-hour return variance doubles with the introduction of trading, which cannot be due to public information since the flow of public information did not change with the trading rules. Having eliminated public information as the cause, we exploit the volatility pattern over the whole day to discriminate between the two alternatives: private information and pricing errors. Three key results support the predictions of private-information models. First, the volatility U-shape flattens: greater revelation over lunch leaves a smaller share for the morning and afternoon. Second, the U-shape tilts upward, an implication of private information that is transitory in nature. Finally, there is a clear U-shape in the morning when Tokyo closes over lunch which disappears with the lunch-hour opening as a full- day U-shape is established.

Date: 1996-07
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://haas.berkeley.edu/~eap/Tokyo.DOC (application/msword)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Working Paper: Is there private information in the FX market? the Tokyo experiment (1997)
Working Paper: Is There Private Information on the FX Market? The Tokyo Experiment (1997)
Working Paper: Is There Private Information in the FX Market? The Tokyo Experiment (1997)
Working Paper: Is There Private Information in the FX Market? The Tokyo Experiment (1997)
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:wop:calbha:_005

Access Statistics for this paper

More papers in Working Papers from University of California at Berkeley, Haas School of Business Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Krichel ().