Microstructure effects, bid-ask spreads and volatility in the spot foreign exchange market pre and post-EMU
Microstructure effects, bid-ask spreads and volatility in the spot foreign exchange market pre and post-EMU
This article examines how microstructure effects, evident in high frequency data, influence bid-ask spreads and volatility in transaction price series. It uses the event of European Monetary Union (EMU), and the upheaval that this entailed, as an opportunity to empirically
investigate these relationships in the electronic inter-dealer spot FX market. These microstructure effects relate to both price and time. There are two price effects: 1) price discreteness and 2) price clustering, and two time effects: 1) the time elapsed between sample
periods and 2) the time-gap between successive trades or quoted price submissions. Strong evidence emerges that all four factors are important in the determination of bid-ask spreads.
price clustering, price discreteness, euro, market microstructure, bid-ask spreads
University of Southampton
McGroarty, Frank
693a5396-8e01-4d68-8973-d74184c03072
ap Gwilym, Owain
dbd356d9-b22d-420b-a980-7341f6d52f34
Thomas, Stephen
3ebf2346-25f1-4f19-b854-7a7da0cee9ca
2004
McGroarty, Frank
693a5396-8e01-4d68-8973-d74184c03072
ap Gwilym, Owain
dbd356d9-b22d-420b-a980-7341f6d52f34
Thomas, Stephen
3ebf2346-25f1-4f19-b854-7a7da0cee9ca
McGroarty, Frank, ap Gwilym, Owain and Thomas, Stephen
(2004)
Microstructure effects, bid-ask spreads and volatility in the spot foreign exchange market pre and post-EMU
(Discussion Papers in Accounting and Finance, AF04-21)
Southampton, UK.
University of Southampton
Record type:
Monograph
(Discussion Paper)
Abstract
This article examines how microstructure effects, evident in high frequency data, influence bid-ask spreads and volatility in transaction price series. It uses the event of European Monetary Union (EMU), and the upheaval that this entailed, as an opportunity to empirically
investigate these relationships in the electronic inter-dealer spot FX market. These microstructure effects relate to both price and time. There are two price effects: 1) price discreteness and 2) price clustering, and two time effects: 1) the time elapsed between sample
periods and 2) the time-gap between successive trades or quoted price submissions. Strong evidence emerges that all four factors are important in the determination of bid-ask spreads.
More information
Published date: 2004
Keywords:
price clustering, price discreteness, euro, market microstructure, bid-ask spreads
Identifiers
Local EPrints ID: 36250
URI: http://eprints.soton.ac.uk/id/eprint/36250
PURE UUID: 673f013a-5487-419d-ab29-0f0bb17d2e4b
Catalogue record
Date deposited: 25 May 2006
Last modified: 16 Mar 2024 03:33
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Contributors
Author:
Frank McGroarty
Author:
Owain ap Gwilym
Author:
Stephen Thomas
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