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Journal Article

Informed Traders, Intervention, and Price Leadership: A Deeper View of the Microstructure of the Foreign Exchange Market

Bettina Peiers
The Journal of Finance
Vol. 52, No. 4 (Sep., 1997), pp. 1589-1614
Published by: Wiley for the American Finance Association
DOI: 10.2307/2329448
Stable URL: http://www.jstor.org/stable/2329448
Page Count: 26
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Informed Traders, Intervention, and Price Leadership: A Deeper View of the Microstructure of the Foreign Exchange Market
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Abstract

This article identifies price leadership patterns in foreign exchange trading, with a focus on central bank intervention as an informational trigger for leadership positioning. Granger causality tests applied to DM/US$ spot rate quotes reveal Deutsche Bank as a price leader up to 60 minutes prior to Bundesbank interventionary reports. By the minus 25-minute mark, interbank quote adjustments become two-way Granger-causal. These results suggest that central bank activity is revealed in stages: first to the price leader, then to competitors, and lastly to the general public.

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