Chapter

Price Impacts of Deals and Predictability of the Exchange Rate Movements

Edited by Takatoshi Ito and Yuko Hashimoto

in International Financial Issues in the Pacific Rim

Published by University of Chicago Press

Published in print August 2008 | ISBN: 9780226386829
Published online February 2013 | e-ISBN: 9780226387086 | DOI: http://dx.doi.org/10.7208/chicago/9780226387086.003.0007
Price Impacts of Deals and Predictability of the Exchange Rate Movements

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This chapter analyzes the forecasting power of order flows (actual deals in the preceding thirty minutes) on future exchange rate movements at various frequencies: one-, five-, fifteen-, and thirty-minute windows. The data used in the analysis is extracted from the EBS from January 1999 to October 2003. There is strong evidence that order flows (deals) have prediction power for the price movement of one minute to five minutes, while thirty minutes is found to be too long for prediction. The degree of price impact diminishes over time, although intervention may induce lagged price impact, and there may be an adjustment process in exchange rate movements.

Keywords: forecasting power; order flows; exchange rates; EBS; price impact

Chapter.  13068 words.  Illustrated.

Subjects: Business and Management

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