Order flow and the Polish zloty : an empirical investigation
Master thesis
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http://hdl.handle.net/11250/2485536Utgivelsesdato
2017Metadata
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- Master of Science [1800]
Sammendrag
This paper analyses price variations in the euro-zloty and dollar-zloty ex-
change rates. Drawing from market microstructure, we use order
ow|signed
buy and sell orders|to model price variations. Our work adds support to the
thesis that order
ow is important in understanding exchange rate
uctua-
tions. We look at two subsamples: pre and post May 2004, when Poland
joined the European Union. Poland kept its own currency, the zloty, which
experienced a structural shift in trading|from the dollar to the euro as main
trading currency. At the most, order
ow explains 29 percent of the variation
in the zloty price of the euro. Moreover, we nd that euro-zloty order
ow
is a better proxy for price-relevant information than the dollar-zloty order
ow. Coe cient analysis shows that our model provides more statistically
signi cant results in the post May 2004 sample for the euro-zloty equation.
Variations in order
ow explain variations in exchange rates, both over time
and across di erent currencies. Our ndings are important for understanding
currencies that experience similar structural shifts as the zloty experienced
when the euro became its main vehicle currency.
Beskrivelse
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2017