2011 Fiscal Year Final Research Report
Microstructure analysis on liquidity and informational efficiency in the foreign exchange market
| Project/Area Number |
21730253
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| Research Category |
Grant-in-Aid for Young Scientists (B)
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| Allocation Type | Single-year Grants |
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| Research Field |
Public finance/Monetary economics
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| Research Institution | Kobe University |
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Principal Investigator |
IWATSUBO Kentaro 神戸大学, 大学院・経済学研究科, 准教授 (90372466)
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| Project Period (FY) |
2009 – 2011
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| Keywords | 為替相場 / 私的情報 / 流動性 / 情報効率性 / ファンダメンタル |
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| Research Abstract |
We study the relationship between liquidity and informational efficiency in the foreign exchange markets. We find that in the electronic broking system informed traders prefer to submit limit orders to market orders and that the informational asymmetry between informed and liquidity traders decreases during the high volume and high liquidity business hours, contributing to improve the informational efficiency. Other study uses the customer market transaction data by a major European bank to investigate whether customer order flows reflect the pre-announced macro fundamentals. We find that the order flows by financial institutions incorporate the information on the not-yet-announced fundamentals and this explains the fundamental-disconnect puzzle and the news puzzle.
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