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Information Flows in Foreign Exchange Markets: Dissecting Customer Currency Trades

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  • LUKAS MENKHOFF
  • LUCIO SARNO
  • MAIK SCHMELING
  • ANDREAS SCHRIMPF
Abstract
We study the information in order flows in the world's largest over-the-counter market, the foreign exchange market. The analysis draws on a data set covering a broad cross-section of currencies and different customer segments of foreign exchange end-users. The results suggest that order flows are highly informative about future exchange rates and provide significant economic value. We also find that different customer groups can share risk with each other effectively through the intermediation of a large dealer, and differ markedly in their predictive ability, trading styles, and risk exposure.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Lukas Menkhoff & Lucio Sarno & Maik Schmeling & Andreas Schrimpf, 2016. "Information Flows in Foreign Exchange Markets: Dissecting Customer Currency Trades," Journal of Finance, American Finance Association, vol. 71(2), pages 601-634, April.
    • Handle: RePEc:bla:jfinan:v:71:y:2016:i:2:p:601-634
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    File URL: http://hdl.handle.net/10.1111/jofi.2016.71.issue-2
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