DP3221 The Use of Flow Analysis in Foreign Exchange: Explanatory Analysis

Author(s): Thomas Gehrig, Lukas Menkhoff
Publication Date: February 2002
Keyword(s): flow trading, foreign exchange markets, market microstructure
JEL(s): F31
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3221

This Paper provides questionnaire evidence on the role of flow analysis for professional traders and fund managers. This evidence suggests that besides fundamental information and technical analysis, the analysis of flows provides an independent third type of information for professionals. The proposition that flows can be used to learn about fundamentals is not consistent with the data. Instead, evidence indicates that flows more likely provide insight into semi-fundamental private information, suggesting support for the efficient market hypothesis only in a weak form.