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Informed and uninformed trading in the EUR/PLN spot market

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  • K. Bień-Barkowska

Abstract

This article seeks to examine the intraday functioning of the interbank foreign exchange spot market of the Polish zloty using a unique set of very detailed data from the Reuters Dealing 3000 Spot Matching System for the year of 2007. Using the sequential trade model of Easley et al . (2008), we can differentiate between the time-varying patterns of strategic behaviour carried out by informed and uninformed (liquidity) traders. These conditional arrival rates for both trade categories can be used to forecast a time-varying probability of informed trading (PIN). We show that the predictions for PIN, as measures of information heterogeneity, influence the scale of impact that the order flow exerts on FX rate changes.

Suggested Citation

  • K. Bień-Barkowska, 2013. "Informed and uninformed trading in the EUR/PLN spot market," Applied Financial Economics, Taylor & Francis Journals, vol. 23(7), pages 619-628, April.
  • Handle: RePEc:taf:apfiec:v:23:y:2013:i:7:p:619-628
    DOI: 10.1080/09603107.2012.741676
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    File URL: http://hdl.handle.net/10.1080/09603107.2012.741676
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    1. repec:wsi:qjfxxx:v:02:y:2012:i:04:n:s2010139212500188 is not listed on IDEAS
    2. repec:wsi:wschap:9789813148543_0016 is not listed on IDEAS
    3. Martin D. D. Evans & Richard K. Lyons, 2017. "Exchange Rate Fundamentals and Order Flow," World Scientific Book Chapters,in: Studies in Foreign Exchange Economics, chapter 16, pages 645-724 World Scientific Publishing Co. Pte. Ltd..
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