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The Rise of Fund Managers in Foreign Exchange: Will Fundamentals Ultimately Dominate?

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  • Gehrig, Thomas
  • Menkhoff,Lukas

Abstract

This paper analyzes the behaviour and motivation of fund managers in foreign exchange markets reflected in questionnaire evidence. We find that fund managers and FX dealers differ significantly. Fund managers rely more on fundamentals, basically due to their longer forecasting horizons, and reject non-fundamental influences on exchange rates more than FX dealers. However, neither can fund managers be considered as pure fundamentalists. Non-fundamentalist positions markedly influence short-term decision-making. They inspire ambivalent views about market imperfections and these views seem to become stronger over time. This latter change counterbalances the strengthening fundamental influences resulting from the rise of fund managers.

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Bibliographic Info

Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-308.

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Length: 35 pages
Date of creation: Nov 2004
Date of revision:
Handle: RePEc:han:dpaper:dp-308

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Keywords: foreign exchange; market microstructure; fund management; fundamentals;

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References

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Citations

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Cited by:
  1. Stephan Schulmeister, 2005. "The Interaction between Technical Currency Trading and Exchange Rate Fluctuations," WIFO Working Papers 264, WIFO.
  2. Fischer, Andreas M. & Isakova, Gulzina & Termechikov, Ulanbek, 2009. "Do FX traders in Bishkek have similar perceptions to their London colleagues?: Survey evidence of market practitioners' views," Journal of Asian Economics, Elsevier, vol. 20(2), pages 98-109, March.
  3. Sawischlewski, Katja & Menkhoff, Lukas & Beckmann, Daniela, 2005. "Robust Lessons about Practical Early Warning Systems," Proceedings of the German Development Economics Conference, Kiel 2005 3, Verein für Socialpolitik, Research Committee Development Economics.
  4. Stephan Schulmeister, 2008. "Aggregate Trading Behaviour of Technical Models and the Yen-Dollar Exchange Rate 1976-2007," WIFO Working Papers 324, WIFO.
  5. Stephan Schulmeister, 2007. "The Interaction Between the Aggregate Behaviour of Technical Trading Systems and Stock Price Dynamics," WIFO Working Papers 290, WIFO.
  6. Schulmeister, Stephan, 2009. "Profitability of technical stock trading: Has it moved from daily to intraday data?," Review of Financial Economics, Elsevier, vol. 18(4), pages 190-201, October.
  7. Menkhoff, Lukas, 2012. "Foreign Exchange Intervention in Emerging Markets: A Survey of Empirical Studies," Hannover Economic Papers (HEP) dp-498, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  8. Stephan Schulmeister, 2007. "Performance of Technical Trading Systems in the Yen/Dollar Market," WIFO Working Papers 291, WIFO.
  9. Lukas Menkhoff, 2008. "High-Frequency Analysis of Foreign Exchange Interventions: What do we learn?," CESifo Working Paper Series 2473, CESifo Group Munich.
  10. Thomas Gehrig & Lukas Menkhoff, 2006. "Extended evidence on the use of technical analysis in foreign exchange," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(4), pages 327-338.

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