Microstructure analysis on liquidity and informational efficiency in the foreign exchange market

点击翻译按钮获取中文摘要

We study the relationship between liquidity and informational efficiency in the foreign exchange markets. We find that in the electronic broking system informed traders prefer to submit limit orders to market orders and that the informational asymmetry between informed and liquidity traders decreases during the high volume and high liquidity business hours, contributing to improve the informational efficiency. Other study uses the customer market transaction data by a major European bank to investigate whether customer order flows reflect the pre-announced macro fundamentals. We find that the order flows by financial institutions incorporate the information on the not-yet-announced fundamentals and this explains the fundamental-disconnect puzzle and the news puzzle.