Danielsson, Jon 
ORCID: 0009-0006-9844-7960, Luo, Jinhui and Payne, Richard
(2012)
Exchange rate determination and inter–market order flow effects.
European Journal of Finance, 18 (9).
pp. 823-840.
ISSN 1351-847X
Abstract
The dependence of foreign exchange rates on order flow is investigated for four major exchange rate pairs, EUR/USD, EUR/GBP, GBP/USD and USD/JPY, across sampling frequencies ranging from 5 min to 1 week. Strong explanatory power is discovered for all sampling frequencies. We also uncover cross-market order flow effects, e.g. GBP exchange rates are very strongly influenced by EUR/USD order flow. We proceed to investigate the predictive power of order flow for exchange rate changes, and it is shown that the order flow specifications reduce RMSEs relative to a random walk for all exchange rates at high-frequencies and for EUR/USD and USD/JPY at lower sampling frequencies.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.tandfonline.com/toc/rejf20/current |
| Additional Information: | © 2012 Copyright Taylor and Francis Group, LLC. |
| Divisions: | Finance Financial Markets Group |
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
| JEL classification: | F - International Economics > F0 - General F - International Economics > F3 - International Finance G - Financial Economics > G1 - General Financial Markets |
| Date Deposited: | 19 Apr 2013 12:09 |
| Last Modified: | 12 Dec 2024 00:04 |
| URI: | http://eprints.lse.ac.uk/id/eprint/37422 |
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