TY - JOUR
T1 - Informed and uninformed trading on the Australian dollar
AU - Hogan, Warren P.
AU - Batten, Jonathan A.
PY - 2005
Y1 - 2005
N2 - Using a high-frequency data set of the spot Australian/US dollar, this study examines the distribution of quotes, spreads, and returns across the trading day. By identifying the direction of trade and the subsequent quote returns from contributing banks, the segmented nature of the market into market-makers and informed and uninformed traders is investigated. The results suggest that the economic gain possible from private information is maximised over 2 to 5 quotes and is rapidly eroded by 20 quotes (about 2 min later during busy trading times) as other new information enters the market. Also, the analysis is revealing of discontinuities in trading and the volatility of pricing across the trading day.
AB - Using a high-frequency data set of the spot Australian/US dollar, this study examines the distribution of quotes, spreads, and returns across the trading day. By identifying the direction of trade and the subsequent quote returns from contributing banks, the segmented nature of the market into market-makers and informed and uninformed traders is investigated. The results suggest that the economic gain possible from private information is maximised over 2 to 5 quotes and is rapidly eroded by 20 quotes (about 2 min later during busy trading times) as other new information enters the market. Also, the analysis is revealing of discontinuities in trading and the volatility of pricing across the trading day.
KW - Foreign exchange
KW - Market microstructure
KW - Price discovery
UR - http://www.scopus.com/inward/record.url?scp=11444254686&partnerID=8YFLogxK
U2 - 10.1016/j.irfa.2004.06.004
DO - 10.1016/j.irfa.2004.06.004
M3 - Article
AN - SCOPUS:11444254686
SN - 1057-5219
VL - 14
SP - 61
EP - 75
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
IS - 1
ER -