Intraday Patterns in FX Returns and Order Flow

Queen Mary, University of London, School of Economics and Finance WP 694

19 Pages Posted: 4 Jul 2012

See all articles by Francis Breedon

Francis Breedon

University of London, Queen Mary - School of Economics and Finance

Angelo Ranaldo

University of St. Gallen; University of St. Gallen - School of Finance

Date Written: April 3, 2012

Abstract

Using a comprehensive high-frequency foreign exchange dataset, we present evidence of time-of-day effects in foreign exchange returns through a significant tendency for currencies to depreciate during local trading hours. We confirm this pattern across a range of currencies and time zones. We also find that this pattern is reflected in order flow and suggest that both patterns relate to the tendency of market participants to be net purchasers of foreign exchange in their own trading hours. Data from a single market maker appears to corroborate that interpretation.

Keywords: Foreign exchange, Microstructure, Order flow, Liquidity

JEL Classification: G15

Suggested Citation

Breedon, Francis and Ranaldo, Angelo, Intraday Patterns in FX Returns and Order Flow (April 3, 2012). Queen Mary, University of London, School of Economics and Finance WP 694. Available at SSRN: https://ssrn.com/abstract=2099321 or http://dx.doi.org/10.2139/ssrn.2099321

Francis Breedon (Contact Author)

University of London, Queen Mary - School of Economics and Finance ( email )

Mile End Road
London, E1 4NS
United Kingdom

Angelo Ranaldo

University of St. Gallen ( email )

Swiss Institute of Banking and Finance s/bf-HSG
Unterer Graben 21
St. Gallen, 9000
Switzerland
+41712247010 (Phone)

HOME PAGE: http://www.sbf.unisg.ch/Lehrstuehle/Lehrstuhl_Ranaldo/Homepage_Ranaldo.aspx

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

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