Price Discovery in Electronic Foreign Exchange Markets: The Sterling/Dollar Market

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13 Citations (Scopus)

Abstract

This study finds that GLOBEX has a marginally lower Hasbrouck, J. (1995) information share than Reuters D3000 in the electronic sterling/dollar foreign exchange market when returns are computed from high frequency data on either midquotes or transaction prices. However, GLOBEX's information share declines sharply when returns are computed from a mixture of GLOBEX transaction prices and Reuters D3000 midquotes. This helps explain why prior studies using this latter methodology report relatively low information shares for GLOBEX in the yen/dollar market. Variations in GLOBEX's information share on an intraday basis can be explained by variations in relative liquidity, spreads and price volatility. © 2009 Wiley Periodicals, Inc.
Original languageEnglish
Pages (from-to)590-606
Number of pages17
JournalJournal of Futures Markets
Volume30
Issue number6
DOIs
Publication statusPublished - 2010

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