"Mining the FX electronic inter-dealer market" by Melody Lo and Chang T. Hsieh

Journal of International Information Management

Article Title

Mining the FX electronic inter-dealer market

Authors

Melody Lo, University of Southern Mississippi
Chang T. Hsieh, University of Southern Mississippi

Abstract

This paper examines the feasibility of applying data mining techniques to testing market efficiency hypothesis using a high frequency, up to one thousand of a second, electronic brokerage data. Results suggest the existence of a pattern of negative autocorrelation in returns of DEM/USD over relative short lags (less than 40 seconds). However, this pattern is not feasible by two reasons: (1) the structure of autocorrelation pattern is inconsistent and changes too rapidly (2) the largest potential speculative profit is smaller than the regulated tick size. These results indicate that dealers have engaged in any potential profitable speculations based on past price information.

Recommended Citation

Lo, Melody and Hsieh, Chang T. (2003) "Mining the FX electronic inter-dealer market," Journal of International Information Management: Vol. 12: Iss. 1, Article 5.
Available at: https://scholarworks.lib.csusb.edu/jiim/vol12/iss1/5

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