@article{eac12672e3f6416fb6890fdb66ee23b8,
title = "The Impact of Order Flow on the Foreign Exchange Market: A Copula Approach",
abstract = "Using the copula function, I propose a new econometric method to measure the state-dependent impact of order flows on returns in foreign exchange markets and examine whether this impact is affected by the number of informed traders. My results indicate that the impact of the order flow decreases as trading becomes more informed. This finding suggests an especially important theoretical implication: that the effect of competition among informed traders tends to dominate that of the adverse selection problem faced by uninformed traders in the euro/dollar and yen/dollar markets.",
keywords = "Copula, Exchange rate, Order flow",
author = "Yoshihiro Kitamura",
note = "Funding Information: Acknowledgements I would like to thank three anonymous referees for their constructive comments and invaluable suggestions, which have substantially improved the paper. I also thank Lukas Menkhoff, Katsushi Tabata and participants at the 23rd annual congress of the European Economic Association for their constructive comments. Naturally, all errors are my own. This work is financially supported by JSPS 19 I also use a co-integration test (ADF-type) for 10-min returns and order flows. The test was performed for both state-dependent and constant co-integration parameters of order flows. I found co-integrational relationships in all cases (the four cases in this study).",
year = "2011",
month = mar,
doi = "10.1007/s10690-010-9118-0",
language = "English",
volume = "18",
pages = "1--31",
journal = "Asia-Pacific Financial Markets",
issn = "1387-2834",
publisher = "Springer New York",
number = "1",
}