| Item Type |
Journal 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 analyzes a novel, comprehensive order flow data set, distinguishing among 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 cost, and other common risk factors shown in the FX literature. |
| Authors |
Ranaldo, Angelo & Somogyi, Fabricius |
| Journal or Publication Title |
Journal of Financial Economics |
| Language |
English |
| Keywords |
Asymmetric information, Currency portfolios, Order flow, OTC, Risk premium |
| Subjects |
finance |
| HSG Classification |
contribution to scientific community |
| HSG Profile Area |
SOF - System-wide Risk in the Financial System |
| Refereed |
Yes |
| Date |
May 2021 |
| Publisher |
Elsevier |
| Volume |
140 |
| Number |
2 |
| Page Range |
391-411 |
| ISSN |
0304-405X |
| Publisher DOI |
https://doi.org/10.1016/j.jfineco.2020.12.007 |
| Official URL |
https://www.sciencedirect.com/science/article/pii/... |
| Depositing User |
Christina Ihasz
|
| Date Deposited |
07 May 2020 07:33 |
| Last Modified |
27 Mar 2023 00:25 |
| URI: |
https://www.alexandria.unisg.ch/publications/260198 |
Asymmetric Information Risk in FX Markets
