Lyons1995 JournalArticle 1995 Journal of Financial Economics 39 321-351 LyonsRichardK. Tests of microstructural hypotheses in the foreign exchange market JOFE 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.