Volume or Order Flow? : Which contains more information in really traded Yen/Dollar Foreign Exchange Market?

Masayuki Susai (Nagasaki University)

Abstract

In this paper, we use real traded foreign exchange data to test mixture of distribution hypothesis. Up to now, it is difficult to use traded foreign exchange rate because foreign exchange rate trade is only a bilateral between dealers in foreign exchange markets. In many papers with foreign exchange rate, they use quoted data or limited data gained from a dealer or a bank directly. With this special data, we find clear impact of trading volume on the volatility and GARCH effect of foreign exchange rate. In addition to trading volume, we explore the impact of order flow and find limited impact. From these findings, trading volume can be better proxy for information arrival than order flow.

Keywords :Traded Foreign Exchange Rate , MDH, GARCH model

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Empirical Study on Asian Financial Markets

Edited by Masayuki Susai Hiromasa Okada

本書は、2006年12月に長崎大学において開催された国際カンファレンス等で報告された東アジアの金融市場を対象とした金融および会計学における実証研究の成果をまとめたものである。