| Item Type |
Conference or Workshop Item
(Paper)
|
| Abstract |
This work studies the information content of trades in the world's largest over-the-counter (OTC) market, the foreign exchange (FX) market. It analyses a novel, comprehensive order flow dataset, distinguishing amongst different groups of market participants and covering a large cross-section of currency pairs. We find compelling evidence of heterogeneous superior information across agents, time and currency pairs, consistent with the asymmetric information theory and OTC market fragmentation. A trading strategy based on the permanent price impact, capturing asymmetric information risk, 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 |
Asymmetric information, Currency portfolios, Order flow, OTC, Price discovery |
| Subjects |
finance |
| HSG Classification |
contribution to scientific community |
| HSG Profile Area |
SOF - System-wide Risk in the Financial System |
| Date |
19 December 2019 |
| Event Title |
Ninth workshop on exchange rates |
| Event Location |
European Central Bank, Frankfurt am Main |
| Event Dates |
19.12.2019 |
| Depositing User |
Christina Ihasz
|
| Date Deposited |
07 Jan 2020 10:23 |
| Last Modified |
20 Mar 2023 01:26 |
| URI: |
https://www.alexandria.unisg.ch/publications/258908 |
Asymmetric Information Risk in FX Markets
