Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 1999-05-07
Number: 99-032/2
Author-Name: Frank de Jong
Author-Email: f.c.j.m.dejong@uva.nl
Author-Workplace-Name: University of Amsterdam and CEPR
Author-Name: Ronald Mahieu
Author-Workplace-Name: Erasmus University Rotterdam
Author-Name: Peter Schotman
Author-Workplace-Name: Limburg Institute of Financial Economics, Maastricht University, and CEPR
Author-Name: Irma van Leeuwen
Author-Workplace-Name: Limburg Institute of Financial Economics, Maastricht University
Title: Price Discovery on Foreign Exchange Markets with Differentially Informed Traders
Abstract: 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.
Classification-JEL: F31; C32
Keywords: exchange rates; moment estimators; high frequency data; microstructure
File-Url: https://papers.tinbergen.nl/99032.pdf
File-Format: application/pdf
File-Size: 966989 bytes
Handle: RePEc:tin:wpaper:19990032