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| Author: | Lyons, R. |
| Title: | Tests of microstructural hypotheses in the foreign exchange market |
| Journal: | Journal of Financial Economics
1995 : OCT/NOV, VOL. 39:2&3, p. 321-351 |
| Index terms: | FOREIGN EXCHANGE INVENTORIES INFORMATION |
| Language: | eng |
| Abstract: | Data in this paper support both the inventory-control and asymmetric-information approaches to microstructure theory. Strong evidence of an inventory-control effect on price is new. The transactions dataset chronicles a trading week of a spot foreign exchange dealer whose daily volume averages over $1 billion. In addition to controlling inventory with his own price, the dealer also lays off inventory at other dealers' prices and through brokers. These results highlight the importance of inventory-control theory in understanding trading in this market. |
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