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Is There Private Information on the FX Market? The Tokyo Experiment

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  • Ito, T.
  • Lyons, R.
  • Melvin, M.T.

Abstract

It is a common view that private information in the foreign exchange market does not exist. We provide evidence against this view. The evidence comes from the introduction of trading in Tokyo over the lunch-hour. Lunch return variance doubles with the introduction of trading, which cannot be due to public information since the flow of public information did not change with the trading rules. Having eliminated public information as the cause, we exploit recent results in micorstructure to discriminate between the two alternatives: private information and pricing errors.

Suggested Citation

  • Ito, T. & Lyons, R. & Melvin, M.T., 1997. "Is There Private Information on the FX Market? The Tokyo Experiment," Papers 97-04, Economisch Institut voor het Midden en Kleinbedrijf-.
    • Handle: RePEc:fth:midkle:97-04
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    More about this item

    Keywords

    INFORMATION ; EXCHANGE RATE ; TRADE;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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