Working Paper: NBER ID: w10856
Authors: Takatoshi Ito; Yuko Hashimoto
Abstract: This paper establishes several intra-day patterns of the high-frequency exchange rate behavior, using the firm bid-ask quote, transaction of the EBS data set. First, the activity of quote and transactions is high in the beginning hours of the three major currency markets -- Tokyo, London, and New York and low during the Tokyo and London lunch hours and late afternoon in New York. Second, a new observation is obtained in that activity does not increase toward the end of business hours in the three major markets, even during the closing hours of New York on Friday. Third, an average bid-ask spread is narrow (wide), when quote and deal frequencies are high (low, respectively), except the beginning hour of Tokyo (GMT 0), when the bid-ask spread is wide despite high levels of activity.
Keywords: Foreign Exchange Market; Intraday Patterns; Electronic Broking System
JEL Codes: F31; F33; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| market timing (G14) | trading volume (G15) |
| trading activity (F19) | bid-ask spread (D44) |
| lunch hours (J22) | trading volume (G15) |
| end of business hours (M10) | trading activity (F19) |