Heterogeneous Information Content of Global FX Trading

Item Type Conference or Workshop Item (Paper)
Abstract This paper studies the information content of trades in the world's largest over-thecounter market, the foreign exchange (FX) market. The results are derived from a comprehensive order flow dataset distinguishing between different groups of market participants and covering a broad cross-section of currency pairs. Our findings show that both the contemporary and permanent price impact are heterogeneous across agents, time, and currency pairs, supporting the asymmetric information theory. A trading strategy based on the permanent price impact capturing superior information generates high returns even after accounting for risk, transaction costs, and other common risk factors documented in the FX literature.
Authors Ranaldo, Angelo & Somogyi, Fabricius
Language English
Keywords Carry trade, Currency portfolios, Heterogeneity, Order flow, Price discovery
Subjects finance
HSG Classification contribution to scientific community
HSG Profile Area SOF - System-wide Risk in the Financial System
Date 4 January 2019
Event Title AFA 2019 Annual Meeting
Event Location Atlanta
Event Dates 4-6 January 2019
Depositing User Christina Ihasz
Date Deposited 29 Jan 2019 08:24
Last Modified 20 Mar 2023 01:25
URI: https://www.alexandria.unisg.ch/publications/256513


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Ranaldo, Angelo & Somogyi, Fabricius: Heterogeneous Information Content of Global FX Trading. 2019. - AFA 2019 Annual Meeting. - Atlanta.


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