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Speculator Activity and Cross-Asset Predictability of FX Returns
Stockholm University, Faculty of Social Sciences, Stockholm Business School.
Stockholm University, Faculty of Social Sciences, Stockholm Business School.ORCID iD: 0000-0003-3378-7543
2018 (English)Conference paper, Oral presentation with published abstract (Refereed)
Abstract [en]

The gradual information diffusion hypothesis (GIDH) suggests that information flows slowly across investors and asset markets and thus generates return predictability. We examine cross-asset return predictability of FX market strategies. Apply the GIDH to empirically investigate the role of speculator activity in cross-asset return predictability of FX market strategies. We hypothesize that when speculators in the FX market are active, the speed of information diffusion into the market increases which, invariably, weaken predictability between the equity and commodity market and FX strategies. Our reported results, which provide strong support for this view, show that when speculators are active in the FX market, predictability from the equity market dissipates and predictability from the commodity market diminishes. Our findings suggest that speculators play a vital role in enhancing informational efficiency in the FX market.

Place, publisher, year, edition, pages
2018.
National Category
Business Administration
Identifiers
URN: urn:nbn:se:su:diva-158100DOI: 10.2139/ssrn.3222067OAI: oai:DiVA.org:su-158100DiVA, id: diva2:1233149
Conference
The 16th INFINITI Conference on International Finance, Poznan, Poland, June 11-12, 2018
Available from: 2018-07-16 Created: 2018-07-16 Last updated: 2018-09-26Bibliographically approved

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Hasselgren, AntonPeltomäki, Jarkko
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CiteExportLink to record
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Citation style
  • apa
  • ieee
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