Price Discovery on Foreign Exchange Markets with Differentially Informed Traders

Arbeitspapier

This paper uses Reuters exchange rate data to investigate thecontributions to the price discovery process by individual banks in theforeign exchange market. We propose multivariate time series models aswell as models in tick time to study the dynamic relations between thequotes of individual banks. We investigate the hypothesis that Germanbanks are price leaders in the deutschmark/dollar market. Our empiricalresults suggest an important but not exclusive role for German banks inthe price discovery process. There is also a group of banks, German andnon-German, that lags behind the market and does not contribute to theprice discovery process. In contrast to Peiers~(1997) we do not findevidence for stronger price leadership of Deutsche bank on days withsuspected Bundesbank interventions in the foreign exchange market.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 99-032/2

Classification and Topics

• Classification: Wirtschaft ; Foreign Exchange ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Subject: exchange rates ; moment estimators ; high frequency data ; microstructure ; Devisenmarkt ; Wechselkurs ; Information ; Schätzung ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): de Jong, Frank ; Mahieu, Ronald ; Schotman, Peter ; van Leeuwen, Irma
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 1999

Further information

• Handle: http://hdl.handle.net/10419/85632
• Last update: 10.03.2025, 11:41 AM CET