International Journal of Industrial Engineering and Management

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Vol. 1 No. 2 (2010)
Original Research Article

Multiscale Analysis of Microstructure Causality in the Foreign Exchange Market

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  • Nikola Gradojevic
Nikola Gradojevic
Faculty of Business Administration, Lakehead University
Bio
DOI: https://doi.org/10.24867/IJIEM-2010-2-006

Published 2010-06-30

abstract views: 7 // FULL TEXT ARTICLE (PDF): 0


Keywords

  • Wavelets,
  • Causality,
  • Foreign Exchange Markets,
  • Market Microstructure

How to Cite

Gradojevic, N. (2010). Multiscale Analysis of Microstructure Causality in the Foreign Exchange Market. International Journal of Industrial Engineering and Management, 1(2), 47–52. https://doi.org/10.24867/IJIEM-2010-2-006

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This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

Recent scholarly work on the causal relationship between exchange rate movements and currency order flows has provided mixed results. This paper proposes a wavelet approach for determining multiscale causality between the Canada/U.S. dollar returns and aggregate market order flow. Evidence of bi-directional causality that contradicts the microstructure literature is found for almost all time scales. Multiresolution analysis identifies significant structural breaks in the data that are potentially driving such findings.

 

Article history: Received (09.09.2010); Revised (27.09.2010); Accepted (25.10.2010)  

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FULL TEXT ARTICLE (PDF)