Intraday patterns in FX returns and order flow
AbstractUsing 10 years of high-frequency foreign exchange data, we present evidence of time-of-day effects in foreign exchange returns through a significant tendency for currencies to depreciate during local trading hours. We confirm this pattern across a range of currencies and find that, in the case of EUR/USD, it can form a simple, profitable trading strategy. We also find that this pattern is present in order flow and suggest that both patterns relate to the tendency of market participants to be net purchasers of foreign exchange in their own trading hours. Data from alternative sources appear to corroborate that interpretation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Swiss National Bank in its series Working Papers with number 2011-04.
Length: 28 pages
Date of creation: 2011
Date of revision:
Contact details of provider:
Postal: Börsenstrasse 15, P. O. Box, CH - 8022 Zürich
Phone: +41 44 631 31 11
Fax: +41 44 631 39 11
Web page: http://www.snb.ch/en/ifor/research/
More information through EDIRC
Foreign Exchange; Microstructure; Order Flow; Liquidity;
Other versions of this item:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-09 (All new papers)
- NEP-MON-2011-04-09 (Monetary Economics)
- NEP-MST-2011-04-09 (Market Microstructure)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ranaldo, Angelo, 2009.
"Segmentation and time-of-day patterns in foreign exchange markets,"
Journal of Banking & Finance,
Elsevier, vol. 33(12), pages 2199-2206, December.
- Angelo Ranaldo, 2007. "Segmentation and Time-of-Day Patterns in Foreign Exchange Markets," Working Papers 2007-03, Swiss National Bank.
- Mende, Alexander & Menkhoff, Lukas, 2006.
"Profits and Speculation in Intra-Day Foreign Exchange Trading,"
Diskussionspapiere der Wirtschaftswissenschaftlichen FakultÃ¤t der Leibniz UniversitÃ¤t Hannover
dp-339, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- Mende, Alexander & Menkhoff, Lukas, 2006. "Profits and speculation in intra-day foreign exchange trading," Journal of Financial Markets, Elsevier, vol. 9(3), pages 223-245, August.
- Breedon, Francis & Vitale, Paolo, 2004.
"An Empirical Study of Liquidity and Information Effects of Order Flow on Exchange Rates,"
CEPR Discussion Papers
4586, C.E.P.R. Discussion Papers.
- Breedon, Francis & Vitale, Paolo, 2004. "An empirical study of liquidity and information effects of order flow on exchange rates," Working Paper Series 0424, European Central Bank.
- Stavros Panageas & Janice C. Eberly & Andrew B. Abel, 2011.
"Optimal Inattention to the Stock Market with Information Costs and Transactions Costs,"
2011 Meeting Papers
102, Society for Economic Dynamics.
- Andrew B. Abel & Janice C. Eberly & Stavros Panageas, 2009. "Optimal Inattention to the Stock Market with Information Costs and Transactions Costs," NBER Working Papers 15010, National Bureau of Economic Research, Inc.
- Rasmus Fatum & Michael M. Hutchison, .
"Is Sterilized Foreign Exchange Intervention Effective After All? An Event Study Approach,"
EPRU Working Paper Series
99-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- Rasmus Fatum & Michael M. Hutchison, 2003. "Is sterilised foreign exchange intervention effective after all? an event study approach," Economic Journal, Royal Economic Society, vol. 113(487), pages 390-411, 04.
- Harald Hau & Massimo Massa & Joel Peress, 2010.
"Do Demand Curves for Currencies Slope Down? Evidence from the MSCI Global Index Change,"
Review of Financial Studies,
Society for Financial Studies, vol. 23(4), pages 1681-1717, April.
- Hau, Harald & Massa, Massimo & Peress, Joël, 2005. "Do Demand Curves for Currencies Slope Down? Evidence from the MSCI Global Index Change," CEPR Discussion Papers 4862, C.E.P.R. Discussion Papers.
- Menzie D. Chinn & Michael J. Moore, 2008. "Private Information and a Macro Model of Exchange Rates: Evidence from a Novel Data Set," NBER Working Papers 14175, National Bureau of Economic Research, Inc.
- Francis Breedon & Dagfinn Rime & Paolo Vital, 2010.
"A Transaction Data Study of the Forward Bias Puzzle,"
2010/26, Norges Bank.
- Breedon, Francis & Rime, Dagfinn & Vitale, Paolo, 2010. "A Transaction Data Study of the Forward Bias Puzzle," CEPR Discussion Papers 7791, C.E.P.R. Discussion Papers.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Enzo Rossi).
If references are entirely missing, you can add them using this form.