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Customer Trading in the Foreign Exchange Market: Empirical Evidence from an Internet Trading Platform

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  • Ingmar Nolte

    ()
    (University of Konstanz)

  • Sandra Lechner

    ()
    (University of Konstanz)

Abstract

This paper analyzes the relationship between currency price changes and their expectations. Currency price change expectations are derived with the help of different order flow measures, from the trading behavior of investors on OANDA FXTrade, which is an internet trading platform in the foreign exchange market. We investigate whether forecasts of intra-day price changes on different sampling frequencies can be improved with the information contained in the flow of our investors’ orders. Moreover, we verify several hypotheses on the trading behavior and the preference structure of our investors by investigating how past price changes affect future order flow.

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Bibliographic Info

Paper provided by Center of Finance and Econometrics, University of Konstanz in its series CoFE Discussion Paper with number 07-03.

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Length: 38 pages
Date of creation: 15 Mar 2007
Date of revision:
Handle: RePEc:knz:cofedp:0703

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Keywords: Customer Dataset; Order Flow; Price Changes; Foreign Exchange Market;

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References

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  1. Nicholas Barberis & Richard Thaler, 2002. "A Survey of Behavioral Finance," NBER Working Papers 9222, National Bureau of Economic Research, Inc.
  2. Richard K. Lyons, 2006. "The Microstructure Approach to Exchange Rates," MIT Press Books, The MIT Press, edition 1, volume 1, number 026262205x, December.
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  17. Easley, David & O'Hara, Maureen, 1992. " Time and the Process of Security Price Adjustment," Journal of Finance, American Finance Association, vol. 47(2), pages 576-605, June.
  18. Payne, Richard, 2003. "Informed trade in spot foreign exchange markets: an empirical investigation," Journal of International Economics, Elsevier, vol. 61(2), pages 307-329, December.
  19. Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October.
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Cited by:
  1. Carol Osler & Xuhang Wang, 2012. "The Microstructure of Currency Markets," Working Papers 49, Brandeis University, Department of Economics and International Businesss School.
  2. Ingmar Nolte & Valeri Voev, 2007. "Panel Intensity Models with Latent Factors: An Application to the Trading Dynamics on the Foreign Exchange Market¤," CoFE Discussion Paper 07-02, Center of Finance and Econometrics, University of Konstanz.

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