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

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Listed:
  • Kentaro Iwatsubo

    (Graduate School of Economics, Kobe University)

  • Yoshihiro Kitamura

    (Faculty of Economics, University of Toyama)

Abstract

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.

Suggested Citation

  • Kentaro Iwatsubo & Yoshihiro Kitamura, 2008. "Intraday Evidence of the Informational Efficiency of the Yen/Dollar Exchange Rate," Discussion Papers 0801, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:0801
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    Cited by:

    1. Galagedera, Don U.A. & Kitamura, Yoshihiro, 2012. "Effect of exchange rate return on volatility spill-over across trading regions," Japan and the World Economy, Elsevier, vol. 24(4), pages 254-265.
    2. Sirimon Treepongkaruna & Robert Brooks & Stephen Gray, 2012. "Do trading hours affect volatility links in the foreign exchange market?," Australian Journal of Management, Australian School of Business, vol. 37(1), pages 7-27, April.

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    More about this item

    Keywords

    Informational efficiency; Market segments; Yen/dollar exchange rate;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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