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Intraday Evidence of the Informational Efficiency of the Yen/Dollar Exchange Rate

  • Kentaro Iwatsubo

    ()

    (Graduate School of Economics, Kobe University)

  • Yoshihiro Kitamura

    ()

    (Faculty of Economics, University of Toyama)

The informational efficiency of the yen/dollar exchange rate is investigated in five market segments within each business day from 1987 to 2007. Among the results, we first find that the daily exchange rate has a cointegrating relationship with the cumula-tive price change of the segment for which the London and New York markets are both open, but not with that of any other segments. Second, the cumulative price change of the London/N.Y. segment is the most persistent among the five market segments in the medium- and long-run. These results suggest that the greatest concentration of informed traders is in the London/N.Y. segment where intraday transactions are the highest. This is consistent with the theoretical prediction by Admati and Pfleiderer (1988) that prices are more informative when trading volume is heavier.

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File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2008/0801.pdf
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Paper provided by Graduate School of Economics, Kobe University in its series Discussion Papers with number 0801.

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Length: 26 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:koe:wpaper:0801
Contact details of provider: Web page: http://www.econ.kobe-u.ac.jpEmail:


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  14. Gregory, Allan W & Hansen, Bruce E, 1996. "Tests for Cointegration in Models with Regime and Trend Shifts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 555-60, August.
  15. 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.).
  16. Alain P. Chaboud & Sergey V. Chernenko & Jonathan H. Wright, 2007. "Trading activity and exchange rates in high-frequency EBS data," International Finance Discussion Papers 903, Board of Governors of the Federal Reserve System (U.S.).
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