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The relation of trade size and price contribution in a traditional foreign exchange brokered market

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  • Ligon, James A.
  • Liu, Hao-Chen

Abstract

Using actual transaction data from the Taiwanese foreign exchange traditional brokered market, we show that the stealth-trading hypothesis does not hold in this market. Large-size trades contribute the most to price change. Examining the role of depth and late day trades, we conclude that this is most likely attributable to the high inventory-control cost in the foreign exchange market and that the survival of traditional brokers in the foreign exchange market may be related to their ability to facilitate large inventory related trades.

Suggested Citation

  • Ligon, James A. & Liu, Hao-Chen, 2013. "The relation of trade size and price contribution in a traditional foreign exchange brokered market," Pacific-Basin Finance Journal, Elsevier, vol. 21(1), pages 1024-1045.
  • Handle: RePEc:eee:pacfin:v:21:y:2013:i:1:p:1024-1045
    DOI: 10.1016/j.pacfin.2012.08.002
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    Cited by:

    1. Kitamura, Yoshihiro, 2017. "Simple measures of market efficiency: A study in foreign exchange markets," Japan and the World Economy, Elsevier, vol. 41(C), pages 1-16.

    More about this item

    Keywords

    Foreign exchange; Microstructure; Stealth trading; Traditional inter-dealer broker;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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