Michael Melvin

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NBER Working Papers and Publications

July 1999Japan's Big Bang and the Transformation of Financial Markets
with Takatoshi Ito: w7247
A first step in the 'big bang' markets was the deregulation of the foreign exchange market on April 1, 1998. This paper examines how the bid-ask spread and conditional volatility in the yen/dollar foreign exchange market changed around the time of the deregulation. Intra-day data are analyzed with the following results: (1) Holding constant the effects of volume and volatility, the deregulation was associated with a convergence of Japanese quoted spreads toward those of other banks. (2) Modeling the persistence in volatility reveals that deregulation lowered conditional volatility.

Published: Blomstrom, M., B. Gangnes, S. La Croix (eds.) Japan’s New Economy. Oxford University Press, January 2001.

February 1997Is There Private Information in the FX Market? The Tokyo Experiment
with Takatoshi Ito, Richard K. Lyons: w5936
It is a common view that private information in the foreign exchange market does not exist. We provide evidence against this view. The evidence comes from the introduction of trading in Tokyo over the lunch-hour. Lunch return variance doubles with the introduction of trading, which cannot be due to public information since the flow of public information did not change with the trading rules. Having eliminated public information as the cause, we exploit the volatility pattern over the whole day to discriminate between the two alternatives: private information and pricing errors. Three key results support the predictions of private-information models. First, the volatility U-shape flattens: greater revelation over lunch leaves a smaller share for the morning and afternoon. Second, the...

Published: Journal of Finance (June 1998): 1111-1130. citation courtesy of

1983An Alternative Approach to International Capital Flows
in The International Transmission of Inflation, Michael R. Darby, James R. Lothian and Arthur E. Gandolfi, Anna J. Schwartz, Alan C. Stockman
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