Skip to main content
Article thumbnail
Location of Repository

How do UK-based foreign exchange dealers think their market operates?

By Yin-Wong Cheung, Menzie David Chinn and Ian W. Marsh


This paper summarises the results of a survey of UK based\ud foreign exchange dealers conducted in 1998. It addresses topics in three\ud main areas: The microeconomic operation of the foreign exchange\ud market; the beliefs of dealers regarding the importance, or otherwise, of\ud macroeconomic fundamental factors in affecting exchange rates;\ud microstructure factors in FX. We find that heterogeneity of traders’ beliefs\ud is evident from the results but that it is not possible to explain such\ud disagreements in terms of institutional detail, rank or trading technique\ud (e.g. technical analysts versus fundamentalists). As expected, nonfundamental\ud factors are thought to dominate short horizon changes in\ud exchange rates, but fundamentals are deemed important over much\ud shorter horizons that the mainstream empirical literature would suggest.\ud Finally, market ‘norms’ and behavioural phenomena are very strong in the\ud FX market and appear to be key determinants of the bid-ask spread

Topics: HG
Publisher: Warwick Business School Financial Econometrics Research Centre
Year: 1999
OAI identifier:

Suggested articles


  1. A Panel-Based Investigation into the Relationship Between Stock Prices and Dividends,
  2. An Analysis of the Performance of European Foreign Exchange Forecasters, doi
  3. An Elementary Account of Amari's Expected Geometry, doi
  4. An Introduction to Differential Geometry in Econometrics, doi
  5. Currency Spillovers and Tri-Polarity: a Simultaneous Model doi
  6. Finite Sample Inference for Extreme Value Distributions,
  7. Forecasting Inflation with a Non-linear Output Gap Model,
  8. Forecasting T-Bill Yields: Accuracy versus Profitability, WP98-03 4. Adam Kurpiel and Thierry Roncalli , Option Hedging with Stochastic Volatility, doi
  9. Forecasting Volatility using LINEX Loss Functions, doi
  10. From Market Micro-structure to Macro Fundamentals: is there Predictability in the Dollar-Deutsche Mark Exchange Rate?,
  11. Hopscotch Methods for Two State Financial Models, doi
  12. How do UK-Based Foreign Exchange Dealers Think Their Market Operates?, doi
  13. Implied Volatility Forecasting: A Compaison of Different Procedures Including Fractionally Integrated Models with Applications to UK Equity Options,
  14. Improved Testing for the Efficiency of Asset Pricing Theories in Linear Factor Models,
  15. Market Risk and the Concept of Fundamental Volatility: Measuring Volatility Across Asset and Derivative Markets and Testing for the Impact of Derivatives Markets on Financial Markets, doi
  16. Modelling Emerging Market Risk Premia Using Higher Moments, doi
  17. On the Evolution of Credibility and Flexible Exchange Rate Target Zones,
  18. Rationality Testing under Asymmetric Loss, doi
  19. Soosung Hwang and Stephen Satchell, Using Bayesian Variable Selection Methods to Choose Style Factors in Global Stock Return Models, doi
  20. Technical Analysis and Central Bank Intervention, doi
  21. The Effects of Systematic Sampling and Temporal Aggregation on Discrete Time Long Memory Processes and their Finite Sample Properties, doi
  22. The survey research handbook doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.