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- Title
Trading Patterns and Prices in the Interbank Foreign Exchange Market.
- Authors
Bollerslev, Tim; Domowitz, Ian
- Abstract
The behavior of quote arrivals and bid-ask spreads is examined for continuously recorded deutsche mark-dollar exchange rate data over time, across locations, and by market participants. A pattern in the intraday spread and intensity of market activity over time is uncovered and related to theories of trading patterns. Models for the conditional mean and variance of returns and bid-ask spreads indicate volatility clustering at high frequencies. The proposition that trading intensity has an independent effect on returns volatility is rejected, but holds for spread volatility. Conditional returns volatility is increasing in the size of the spread.
- Subjects
FOREIGN exchange market; MARK (German currency); U.S. dollar; SPREAD (Finance); MARKET volatility; MATHEMATICAL models of finance; TIME series analysis; CURRENCY convertibility; SECURITIES trading volume; STOCK quotations
- Publication
Journal of Finance (Wiley-Blackwell), 1993, Vol 48, Issue 4, p1421
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/j.1540-6261.1993.tb04760.x