Liquidity in the global currency market

• 成果类型: Article
• 署名作者: Ranaldo, Angelo; de Magistris, Paolo Santucci
• 署名单位: University of St Gallen; Swiss Finance Institute (SFI); Luiss Guido Carli University; CREATES; Aarhus University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2022.09.004
• 发表日期: 2022
• 页码: 859-883
• 关键词: Currency market; Foreign exchange; Global liquidity; Price impact; arbitrage

摘要

We study the liquidity of the global currency market by analyzing the price impact of trading volume. We analyze a decade of CLS intraday data representative of global foreign exchange (FX) trading by developing a refinement of the popular Amihud (2002) illiquidity measure that we call realized Amihud, which is the ratio between realized volatility and trading volume. Inversely related to market depth, price impact increases with trans-action costs, money market stress, uncertainty, and risk aversion. Furthermore, we analyze whether and how liquidity begets price efficiency by looking at violations of the triangular no-arbitrage condition. We find that dollar-based currencies offer a lower trading impact supporting price efficiency.(c) 2022 The Author(s). Published by Elsevier B.V.This is an open access article under the CC BY license ( http://creativecommons.org/licenses/by/4.0/ )