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Explaining trading volume in the euro

  • Janusz Brzeszczynski

    (Heriot-Watt University, Edinburgh, UK)

  • Michael Melvin

    (Arizona State University, Tempe, AZ, USA)

Following the introduction of the euro in 1999, daily trade volume began a downward trend until early 2002, after which daily volume started to trend upward. A model of weekly trades suggests that changes in momentum as well as the carry trade motives of interest differentials are significant explanatory factors. Daily data examination reveals that Fridays have lower activity, and Tuesdays greater activity than average. At the intradaily level, trading is very low before and after London business hours. Within the London business day, trade activity is higher in 5-min intervals when a 'big figure' is breached. This is consistent with stop-loss or take-profit motives for trading. Copyright © 2006 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/ijfe.289
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Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 11 (2006)
Issue (Month): 1 ()
Pages: 25-34

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Handle: RePEc:ijf:ijfiec:v:11:y:2006:i:1:p:25-34
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  1. Michael Melvin & Xixi Yin, . "Public Information Arrival, Exchange Rate Volatility, and Quote Frequency," Working Papers 96/1, Arizona State University, Department of Economics.
  2. C. L. Osler, 2002. "Stop-loss orders and price cascades in currency markets," Staff Reports 150, Federal Reserve Bank of New York.
  3. Alain P. Chaboud & Sergey Chernenko & Edward Howorka & Raj S. Krishnasami Iyer & David Liu & Jonathan H. Wright, 2004. "The high-frequency effects of U.S. macroeconomic data releases on prices and trading activity in the global interdealer foreign exchange market," International Finance Discussion Papers 823, Board of Governors of the Federal Reserve System (U.S.).
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