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International Financial Issues in the Pacific RimGlobal Imbalances, Financial Liberalization, and Exchange Rate Policy$
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Takatoshi Ito and Andrew K. Rose

Print publication date: 2008

Print ISBN-13: 9780226386829

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226387086.001.0001

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Price Impacts of Deals and Predictability of the Exchange Rate Movements

Price Impacts of Deals and Predictability of the Exchange Rate Movements

(p.177) 6 Price Impacts of Deals and Predictability of the Exchange Rate Movements
International Financial Issues in the Pacific Rim
Takatoshi Ito, Yuko Hashimoto
University of Chicago Press

This chapter analyzes the forecasting power of order flows (actual deals in the preceding thirty minutes) on future exchange rate movements at various frequencies: one-, five-, fifteen-, and thirty-minute windows. The data used in the analysis is extracted from the EBS from January 1999 to October 2003. There is strong evidence that order flows (deals) have prediction power for the price movement of one minute to five minutes, while thirty minutes is found to be too long for prediction. The degree of price impact diminishes over time, although intervention may induce lagged price impact, and there may be an adjustment process in exchange rate movements.

Keywords:   forecasting power, order flows, exchange rates, EBS, price impact

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