PT Journal
AU Lyons, RK
TI Tests of microstructural hypotheses in the foreign exchange market
SO Journal of Financial Economics
JI JOFE
PY 1995
BP 321
EP 351
VL 39
LA English
DE foreign exchange; FX; microstructure; inventory; information
AB Data in this paper support both the inventory-control and asymmetric-information approaches to microstructure theory. Strong evidence of an inventory-control effect on price is new. The transactions dataset chronicles a trading week of a spot foreign exchange dealer whose daily volume averages over $1 billion. In addition to controlling inventory with his own price, the dealer also lays off inventory at other dealers’ prices and through brokers. These results highlight the importance of inventory-control theory in understanding trading in this market.
ER