The Impact of Order Flow on the Foreign Exchange Market: A Copula Approach

Yoshihiro Kitamura*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)


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.

Original languageEnglish
Pages (from-to)1-31
Number of pages31
JournalAsia-Pacific Financial Markets
Issue number1
Publication statusPublished - 2011 Mar
Externally publishedYes


  • Copula
  • Exchange rate
  • Order flow

ASJC Scopus subject areas

  • Finance


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