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Intraday Momentum in FX Markets: Disentangling Informed Trading from Liquidity Provision

34 Pages Posted: 25 Nov 2015  

Gert Elaut

Ghent University

Michael Frömmel

Ghent University - Department of Financial Economics

Kevin Lampaert

Ghent University

Date Written: November 24, 2015

Abstract

We examine intraday momentum in the RUB-USD exchange market and its relationship with informed trading and liquidity provision. Using tick-by-tick transaction level data from the Moscow Interbank Currency Exchange (MICEX) for the period 2005 to 2014, we establish the presence of intraday momentum, defined as a significantly positive relationship between the first half-hour return and the last-half hour return. We find that, for our specific dataset, intraday momentum does not appear to be the result of informed trading. Instead, our results suggest that intraday momentum is consistent with risk-aversion for overnight holdings among liquidity providers.

Keywords: Informed Trading, Intraday, Liquidity Demand, Momentum

JEL Classification: G11, G14

Suggested Citation

Elaut, Gert and Frömmel, Michael and Lampaert, Kevin, Intraday Momentum in FX Markets: Disentangling Informed Trading from Liquidity Provision (November 24, 2015). Available at SSRN: https://ssrn.com/abstract=2694985 or http://dx.doi.org/10.2139/ssrn.2694985

Gert Elaut (Contact Author)

Ghent University ( email )

Ghent, 9000
Belgium

Michael Frömmel

Ghent University - Department of Financial Economics ( email )

Sint-Pietersplein 5
Ghent, 9000
Belgium

Kevin Lampaert

Ghent University ( email )

Sint-Pietersplein 5
Gent, 9000
Belgium

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