Microstructure and efficiency in the foreign exchange market: examination using high-frequency data

2016 Fiscal Year Final Research Report

• Project/Area Number: 25245044
• Research Category: Grant-in-Aid for Scientific Research (A)
• Allocation Type: Single-year Grants
• Section: 一般
• Research Field: Money/ Finance
• Research Institution: National Graduate Institute for Policy Studies (2014-2016); The University of Tokyo (2013)
• Principal Investigator: Ito Takatoshi 政策研究大学院大学, 政策研究科, 特別教授 (30203144)
• Project Period (FY): 2013-10-21 – 2017-03-31
• Keywords: 為替レート / 効率性 / 高頻度データ / EBS取引システム / アルゴリズム取引 / 三角裁定 / 為替介入 / 外貨準備

Outline of Final Research Achievements

The EBS trading platform has allowed the bank computers with algorithm being directly connected to the EBS computer mid-2000s. Using the 1-second-slice high-frequency data, it was shown that occurrence of arbitrage violation has become much less frequent, and less persistent once happened, since mid-2000s. High-frequency trading contributed to market efficiency.
The Japanese monetary authority has intervened, selling the yen, buying the dollar more often than otherwise. The foreign reserves balance has continuously risen. The profit and loss of holding foreign reserves can be divided into interest income based on the US-Japan interest rate differential, realized gains and unrealized gains. A rigorous examination of data since 1973 shows the total profit has stayed in positive for most of the period.

Free Research Field

国際金融、日本経済論