Asymmetric Information in the Interbank Foreign Exchange Market

30 Pages Posted: 17 Feb 2009 Last revised: 4 May 2010

See all articles by Geir Hoidal Bjonnes

Geir Hoidal Bjonnes

The Norwegian School of Management BI

Carol L. Osler

Brandeis University - International Business School

Dagfinn Rime

BI Norwegian Business School

Multiple version iconThere are 2 versions of this paper

Date Written: February 15, 2009

Abstract

This paper provides evidence of private information in the interbank foreign exchange market. Our trading data are unique because they include trading-party identities and because they comprehensively include all interbank trading venues. We find that larger banks have more information than smaller banks and that the relation between order flow and returns is stronger for larger banks than smaller banks. This, in turn, implies that information is an important reason for the positive relation between order flow and returns. We also find that limit orders sometimes carry information and that large-bank limit orders are relatively well-informed.

Keywords: foreign exchange, microstructure, asymmetric information, liquidity premium

JEL Classification: G15, F31, F3

Suggested Citation

Bjonnes, Geir Hoidal and Osler, Carol L. and Rime, Dagfinn, Asymmetric Information in the Interbank Foreign Exchange Market (February 15, 2009). Available at SSRN: https://ssrn.com/abstract=1343833 or http://dx.doi.org/10.2139/ssrn.1343833

Geir Hoidal Bjonnes

The Norwegian School of Management BI ( email )

Nydalsveien 37
Oslo, 0484
Norway
+47 46410502 (Phone)

HOME PAGE: http://www.bi.no/BI/AcademicProfile____37601.aspx?ansattid=/fgl96014

Carol L. Osler

Brandeis University - International Business School ( email )

Mailstop 32
Waltham, MA 02454-9110
United States
781-736-4826 (Phone)

Dagfinn Rime (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway
+47-46410507 (Phone)

HOME PAGE: http://home.bi.no/dagfinn.rime/

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