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

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  • Sandra Lechner
  • Ingmar Nolte

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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Paper provided by Warwick Business School, Finance Group in its series Working Papers with number wp09-01.

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Date of creation: 2009
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Handle: RePEc:wbs:wpaper:wp09-01

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  1. 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.
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Cited by:
  1. 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.
  2. Carol Osler & Xuhang Wang, 2012. "The Microstructure of Currency Markets," Working Papers 49, Brandeis University, Department of Economics and International Businesss School.

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