TY  - JOUR
AU  - Lyons,Richard K.
TI  - Foreign Exchange Volume: Sound and Fury Signifying Nothing?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4984
PY  - 1995
Y2  - January 1995
UR  - http://www.nber.org/papers/w4984
L1  - http://www.nber.org/papers/w4984.pdf
N1  - Author contact info:
Richard K. Lyons
460 Michigan Ave
Berkeley, CA 94707
Tel: 510-642-1059
Fax: 510-642-4700
E-Mail: lyons@haas.berkeley.edu
M1  - published as Richard K. Lyons. "Foreign Exchange Volume: Sound and Fury Signifying Nothing?," in Jeffrey A. Frankel, Giampaolo Galli, Alberto Giovannini, editors, "The Microstructure of Foreign Exchange Markets" University of Chicago Press (1996)

AB  - This paper examines whether currency trading volume is informative, and under what circumstances.  Specifically, we use transactions data to test whether trades occurring when trading intensity is high are more informative - dollar for dollar - than trades occurring when intensity is low.  Theory admits both possibilities, depending primarily on the posited information structure.  We present what we call a hot-potato model of currency trading, which explains why low-intensity trades might be more informative.  In the model, the wave of inventory-management trading among dealers following innovations in order flow generates an inverse relationship between intensity and information content.  Empirically, low-intensity trades are more informative, supporting the hot-potato hypothesis."
ER  -