TY  - JOUR
AU  - Ito, Takatoshi
AU  - Hashimoto, Yuko
TI  - Price Impacts of Deals and Predictability of the Exchange Rate Movements
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12682
PY  - 2006
Y2  - November 2006
DO  - 10.3386/w12682
UR  - http://www.nber.org/papers/w12682
L1  - http://www.nber.org/papers/w12682.pdf
N1  - Author contact info:
Takatoshi Ito
Columbia University
School of International and Public Affairs
Room 927 IAB (MC 3333)
420 West 118th Street
New York, NY 10027
Tel: 212-854-6401
Fax: 212-749-1497
E-Mail: ti2164@columbia.edu

Yuko Hashimoto
Statistics Department
International Monetary Fund
700 19th Street, NW
Washington D.C., 20431
E-Mail: yhashimoto@imf.org
M1  - published as Takatoshi Ito, Yuko Hashimoto. "Price Impacts of Deals and Predictability of the Exchange Rate Movements," in Takatoshi Ito and Andrew K. Rose, editors, "International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy" University of Chicago Press (2008)

M3  - presented at "East Asian Seminar on Economics", June 22-24, 2006
AB  - This paper examines the price impact and the predictability of the exchange rate movement using the transaction data recorded in the electronic broking system of the spot foreign exchange market. The number of actual deals at the ask (or bid side) for a specified time interval may be regarded as "order flows" to buy (or sell) in Richard Lyons' work.  First, the contemporaneous impact of order flows on the quote and deal prices are analyzed. Second, the price predictability is examined. Our forecasting equations of the exchange rate for the next X minutes (X=1, 5, 15, 30) show that coefficients are significantly different from zero in both 5-min and 1-min forecast horizons, but the significance disappears in the 30-minute interval. The t-statistics become larger as the prediction window becomes shorter. Price impacts of deals at one side of the market are significant but short-lived. Market participants, if they can observe and analyze all the transactions information in real time, may be able to extract information to predict the price movements in the following next few minutes.
ER  -