How Mature is the AUD/NZD Market?

29 Pages Posted: 22 Aug 2007

See all articles by Russell Poskitt

Russell Poskitt

University of Auckland - Department of Accounting and Finance

Alastair Marsden

University of Auckland - Business School

Date Written: August 22, 2007

Abstract

We use a high frequency data set to examine information flows between the direct AUD/NZD market and the indirect AUD/USD and NZD/USD markets for the Australian dollar/New Zealand dollar cross-rate. Our results show that information flows are dominated by the contemporaneous information flow during the most active part of the trading day and by the lagged flow of information from the indirect to the direct market when trading activity is low. The lagged flow of information from the direct market to the indirect market is never the dominant channel. These results show that the US dollar markets for the Australasian currency pair remain the locus of price discovery and suggest that the direct AUD/NZD market is still relatively immature, despite the recent growth in trading activity. Knowledge of the leading role played by lagged information flows from the indirect market cannot, however, be exploited profitably.

Keywords: foreign exchange markets, price discovery

JEL Classification: G13, G14, G15

Suggested Citation

Poskitt, Russell and Marsden, Alastair D.E., How Mature is the AUD/NZD Market? (August 22, 2007). 20th Australasian Finance & Banking Conference 2007 Paper. Available at SSRN: https://ssrn.com/abstract=1008386 or http://dx.doi.org/10.2139/ssrn.1008386

Russell Poskitt (Contact Author)

University of Auckland - Department of Accounting and Finance ( email )

Private Bag 92019
Auckland 1001
New Zealand
64 9 373 7599 Ext. 85908 (Phone)
64 9 373 7406 (Fax)

HOME PAGE: http://staff.business.auckland.ac.nz/rposkitt

Alastair D.E. Marsden

University of Auckland - Business School ( email )

Private Bag 92019
Room: C208
Auckland
New Zealand
64 9 373 7999 (Phone)
64 9 373 7406 (Fax)

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