TY - JOUR
T1 - Intraday evidence of the informational efficiency of the yen/dollar exchange rate
AU - Iwatsubo, Kentaro
AU - Kitamura, Yoshihiro
N1 - Funding Information:
We are grateful to an anonymous referee and Mark Taylor (the editor) for their constructive insights. We also thank the participants of the Institute of Statistical Research conference in Barcelona, Spain for useful comments. This work is financially supported by Grant-in-Aid for Young Scientists (B18730211, K. Iwatsubo; B19730216, Y. Kitamura) and Yamada Academic Research Promotion Fund.
PY - 2009
Y1 - 2009
N2 - 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 cumulative price change of the segment for which the London and New York (NY) markets are both open, but not with that of any other segments. Second, the cumulative price change of the London/NY 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/NY 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.
AB - 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 cumulative price change of the segment for which the London and New York (NY) markets are both open, but not with that of any other segments. Second, the cumulative price change of the London/NY 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/NY 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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U2 - 10.1080/09603100802389015
DO - 10.1080/09603100802389015
M3 - Article
AN - SCOPUS:68049089795
SN - 0003-6846
VL - 19
SP - 1103
EP - 1115
JO - Applied Economics
JF - Applied Economics
IS - 14
ER -