publication . Article . Preprint . 2015

Multiscale Analysis of Foreign Exchange Order Flows and Technical Trading Profitability

Gradojevic, Nikola; Lento, Camillo;
Open Access
  • Published: 01 Jun 2015 Journal: Economic Modelling, volume 47, pages 156-165 (issn: 0264-9993, Copyright policy)
  • Publisher: Elsevier BV
  • Country: France
Abstract
This paper investigates the multiscale (frequency-dependent) relationship between technical trading profitability and feedback trading effects in the Canada/U.S. dollar foreign exchange market. The results suggest weak evidence that technical trading activities of financial and non-financial customers drive frequent violations of the FX market microstructure assumption that exchange rate movements are driven by order flow. After controlling for transaction costs, we find that the contribution of financial customers in feedback trading dominates the contribution of non-financial customers at lower frequencies, while the opposite holds at higher frequencies. In ad...
Subjects
free text keywords: Foreign Exchange Markets; Order Flows; Technical Trading; Frequency Domain, Foreign exchange markets, Order flows, Technical trading, Frequency domain, [SHS.GESTION]Humanities and Social Sciences/Business administration, jel:F31, jel:G14, jel:C53, Market microstructure, Algorithmic trading, computer.software_genre, computer, Open outcry, Electronic trading, Economics, Trading strategy, Flash trading, Alternative trading system, High-frequency trading, Financial economics
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publication . Article . Preprint . 2015

Multiscale Analysis of Foreign Exchange Order Flows and Technical Trading Profitability

Gradojevic, Nikola; Lento, Camillo;