Simple measures of market efficiency: A study in foreign exchange markets

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

Previous studies on the stock market consider the degree of market efficiency to be an inverse of the predictive power of order flow. Following this notion, I propose simple market efficiency measures in foreign exchange (FX) markets. The first measure considers the market to be inefficient when positive (negative) order flows predict the appreciation (depreciation) of a base currency. The second measure considers whether predictions using order flow result in tangible gains. These measures are related to liquidity levels and information factors in FX markets, unlike the measures in previous studies.

Original languageEnglish
Pages (from-to)1-16
Number of pages16
JournalJapan and the World Economy
Volume41
DOIs
Publication statusPublished - 2017 Mar 1

Fingerprint

foreign exchange
efficiency
market
liquidity
stock market
currency
Order flow
Market efficiency
Foreign exchange market

Keywords

  • Information asymmetry
  • Liquidity
  • Market efficiency
  • Order flows
  • Stealth trading

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

Cite this

Simple measures of market efficiency : A study in foreign exchange markets. / Kitamura, Yoshihiro.

In: Japan and the World Economy, Vol. 41, 01.03.2017, p. 1-16.

Research output: Contribution to journalArticle

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