Working Paper: CEPR ID: DP3221
Authors: Thomas Gehrig; Lukas Menkhoff
Abstract: This Paper provides questionnaire evidence on the role of flow analysis for professional traders and fund managers. This evidence suggests that besides fundamental information and technical analysis, the analysis of flows provides an independent third type of information for professionals. The proposition that flows can be used to learn about fundamentals is not consistent with the data. Instead, evidence indicates that flows more likely provide insight into semi-fundamental private information, suggesting support for the efficient market hypothesis only in a weak form.
Keywords: flow trading; foreign exchange markets; market microstructure
JEL Codes: F31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| flow analysis (C67) | rationality indicators (D01) |
| flow analysis (C67) | size of trading institutions (D47) |
| size of trading institutions (D47) | trading behavior (G41) |
| flow analysis (C67) | trading behavior (G41) |
| flow analysis (C67) | immediate access to order flows (C69) |
| immediate access to order flows (C69) | trading behavior (G41) |