Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7364560 | Journal of International Financial Markets, Institutions and Money | 2016 | 14 Pages |
Abstract
Contemporaneous and positive correlation between order flow and exchange rate is a stylized fact. I postulate that the order flow driven by informed trading has a significant price impact. I also do that little price reversal occurs in the subsequent period. The Markov-switching model provides probabilities of a significant price impact and little price reversal. I apply these probabilities to measure the probability of informed trading. The measure explains a greater share of the random walk component of price compared to other measures offered by previous studies.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Yoshihiro Kitamura,