Short-term speculators and the puzzling behaviour of exchange rates

Osler, Carol L.

doi:10.1016/s0022-1996(97)00024-x

Cited by 48 publications

(35 citation statements)

References 35 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Together, these papers support the central proposition of the microstructure approach to exchange rates, that short-run exchange-rate movements are heavily influenced by order flow ; Osler (1998); Evans and Lyons (1999); Rime (2000); Lyons (2001);Evans (2001)). They also indicate that order flow can change for reasons that are unconnected to changes in the amount of private information reaching the market.…”

mentioning

confidence: 55%

See 1 more Smart Citation

Currency Orders and Exchange-Rate Dynamics: Explaining the Success of Technical Analysis

Osler

2001

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu Terms of use: Documents in EconStor may CURRENCY ORDERS AND EXCHANGE-RATE DYNAMICS: EXPLAINING THE SUCCESS OF TECHNICAL ANALYSIS C. L. OslerAbstract This paper provides a microstructural explanation for the success of two familiar predictions from technical analysis: (1) trends tend to be reversed at predictable support and resistance levels, and (2) trends gain momentum once predictable support and resistance levels are crossed.The explanation is based on a close examination of stop-loss and take-profit orders at a large foreign exchange dealing bank. Take-profit orders tend to reflect price trends, and stop-loss orders tend to intensify trends. The requested execution rates of these orders are strongly clustered at round numbers, which are often used as support and resistance levels. Significantly, there are marked differences between the clustering patterns of stop-loss and take-profit orders, and between the patterns of stop-loss buy and stop-loss sell orders. These differences explain the success of the two predictions.

show abstract

mentioning

confidence: 55%

“…Osler (1998) and Rossi (2000) both show that theoretical models could highlight the correct fundamentals while nonetheless failing empirically. Intuitively, it still seems likely that these fundamentals are critical determinants of long-run exchange-rate dynamics.…”

mentioning

confidence: 99%

Currency Orders and Exchange-Rate Dynamics: Explaining the Success of Technical Analysis

Osler

2001

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…The finite speed of adjustment I a (for given w t ) may be rationalised by the fact that informed traders are aware of the uniformed traders' destabilising influence on exchange rates (DeLong et al, 1990). Alternatively, informed traders may recognise that closing their open positions moves the exchange rate in the opposite direction and so the adjustment has to be gradual (Osler, 1998).…”

Section: A Microstructural Model Of the Coordination Channelmentioning

confidence: 99%

FX intervention in the Yen-US dollar market: a coordination channel perspective

Reitz

Taylor

2012

Int Econ Econ Policy

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in FX Intervention in the Yen-US Dollar Market: A Coordination Channel PerspectiveStefan Reitz and Mark P. Taylor Abstract:The coordination channel has recently been established as an additional means by which foreign exchange market intervention may be effective. It is conjectured that strong and persistent misalignments of the exchange rate are caused by a coordination failure among fundamentals-based traders. In such situations official intervention may act as a coordinating signal, encouraging traders to engage in stabilizing speculation. We apply the framework developed in Reitz and Taylor (2008) ABSTRACTThe coordination channel has recently been established as an additional means by which foreign exchange market intervention may be effective. In Sarno and Taylor (2001) it is conjectured that strong and persistent misalignments of the exchange rate are caused by a coordination failure among fundamentals-based traders. In such situations official intervention may act as a coordinating signal, encouraging traders to engage in stabilizing speculation. We apply the framework developed in Reitz and Taylor (2008) to daily data on the yen-US dollar exchange rate and on Federal Reserve and Japanese Ministry of Finance intervention operations. The results provide further support for the coordination channel of intervention effectiveness.JEL classification: C10; F31, F41

show abstract

“…Another explanation for a smooth adjustment of the exchange rate to its long-run equilibrium value is proposed by Osler (1998). Speculators, submitting orders to exploit the current deviation of the exchange rate from its fundamental value, anticipate the impact of closing their position.…”

Section: Fundamentalists' Rule In a Floating Regimementioning

confidence: 99%

Exchange rate dynamics in a target zone—A heterogeneous expectations approach

Bauer

Reitz

2009

Journal of Economic Dynamics and Control

View full text Add to dashboard Cite

The target zone model of Krugman (1991) has failed empirically. In this paper, we develop a model of the exchange rate with heterogeneous agents in a free floating and a target zone regime. We show that this simple model mimics the empirical puzzles of exchange rates: excessive volatility, fat tails, volatility clustering, and disconnection from the fundamentals. In addition, the target zone regime replicates a reduced nominal volatility for the same level of fundamental volatility as in the free floating regime and the distribution of the exchange rate within the band is hump-shaped.JEL Code: F31, F41.

show abstract

Short-term speculators and the puzzling behaviour of exchange rates

Cited by 48 publications

References 35 publications

Currency Orders and Exchange-Rate Dynamics: Explaining the Success of Technical Analysis

Currency Orders and Exchange-Rate Dynamics: Explaining the Success of Technical Analysis

FX intervention in the Yen-US dollar market: a coordination channel perspective

Exchange rate dynamics in a target zone—A heterogeneous expectations approach

Contact Info

Product

Resources

About