Graciela Kaminsky, Richard K. Lyons, Sergio Schmukler
We examine the trading strategies of mutual funds in emerging markets. We develop a method for disentangling the behavior of fund managers from that of underlying investors. For both managers and...
H. Henry Cao, Richard K. Lyons, Professor Richard, K. Lyons
In a world with symmetric information about fundamentals, can information-based trade still arise? Consider bond and foreign exchange markets, for example, where private information about nominal...
BNP Paribas Asset Management, London (2007)
William P. Killeen, Richard K. Lyons, Michael J. Moore
This paper addresses the puzzle of regime-dependent volatility in foreign exchange. We extend the literature in two ways. First, our microstructural model provides a qualitatively new explanation for...
Richard K. Lyons, Richard K. Lyons
This paper tests the portfolio-balance approach to exchange rate determination in a new way. Past work on portfolio balance in foreign exchange falls into two groups: (1) tests using measures of...
New perspective on FX markets: Order-flow analysis (2007)
Though fundamental and technical analysis are still widely used in foreign exchange markets, a new type of analysis has emerged: order-flow analysis. Order-flow analysis uses the flow of buy and sell...
This chapter uses implied volatilities to examine both the existence and form of the currency risk premium. First, I test for “simple efficiency”, under which there is no risk premium and...
Richard Lyons December, Richard K. Lyons, Richard K. Lyons
This paper tests whether macroeconomic news is transmitted to exchange rates via induced transactions, and if so, what share occurs via transactions versus traditional direct adjustment of price. We...
Richard Lyons This, Richard K. Lyons, Richard K. Lyons
Macroeconomic models of nominal exchange rates perform poorly. In sample, R statistics as high as 10 percent are rare. Out of sample, these models are typically out-forecast by a nave random walk....
Search Costs: The Neglected Spread Component (2007)
Mark Flood Ronald, Ronald Huisman, Kees G. Koedijk, Richard K. Lyons, Professor Richard Lyons
Dealers need to search for quotes in many of the world's largest markets (such as spot foreign exchange, US government bonds, and the London Stock Exchange). This search affects trading cost. We...
Understanding order flow (2006)
This paper develops a model for understanding end-User order flow in the FX market. The model addresses several puzzling findings. First, the estimated price-impact of flow from different end-user...
Richard K. Lyons, Richard K. Lyons
We address four common misconceptions about micro-based research on exchange rates: (1) public news arrivals account for most exchange rate variation; (2) allocative trades do not convey information;...
Meese-Rogoff Redux: Micro-Based Exchange Rate Forecasting (2005)
Evans, Martin D., Lyons, Richard K.
This paper compares the true, ex-ante forecasting performance of a micro-based model against both a standard macro model and a random walk. In contrast to existing literature, which is focused on...
Managers, investors, and crises: mutual fund strategies in emerging markets (2004)
Kaminsky, G, Lyons, Richard K., Schmukler, S L
We examine the trading strategies of mutual funds in emerging markets. We develop a method for disentangling the behavior of fund managers from that of underlying investors. For both managers and...
BNP Paribas Asset Management, London (2004)
William P. Killeen, Richard K. Lyons, Michael J. Moore
This paper addresses the puzzle of regime-dependent volatility in foreign exchange. We extend the literature in two ways. First, our microstructural model provides a qualitatively new explanation for...
How is Macro News Transmitted to Exchange Rates (2003)
Using data that avoid the stale quotes problem, we show that order flow contributes more to currency price changes following public news than at other times. This is inconsistent with news effects...
Are Different-Currency Assets Imperfect Substitutes? (2003)
This paper provides a new test for whether different-currency assets are imperfect substitutes. Past work on imperfect substitutability in foreign exchange falls into two groups: (1) tests using...
The Future of the Foreign Exchange Market (2002)
Brookings-Wharton Papers on Financial Services - 2002
Richard K. Lyons, Richard K. Lyons
This paper addresses whether currency trades have greater price impact during periods of rapid public information flow. Central bankers often suggest that expectations are at times “ripe ” for...
Mutual Fund Investment in Emerging Markets: An Overview (2001)
Graciela L. Kaminsky, Richard K. Lyons, Sergio L. Schmukler, Kristin Forbes, Jonathan Garner, Andrew Karolyi, ...
International mutual funds are key contributors to the globalization of financial markets and one of the main sources of capital flows to emerging economies. Despite their importance in emerging...
Order Flow and Exchange Rate Dynamics (2001)
Macroeconomic models of nominal exchange rates perform poorly. The proportion of monthly exchange rate changes that these models can explain is essentially zero. Ths paper presents
Mutual Fund Investment in Emerging Markets: An Overview (2001)
Kaminsky, Graciela L., Lyons, Richard K., Schmukler, Sergio L.
International mutual funds are key contributors to the globalization of financial markets and one of the main sources of capital flows to emerging economies. Despite their importance in emerging...
BNP Paribas Asset Management (2000)
William P. Killeen, Richard K. Lyons, Michael J. Moore
We use new data on FF/DM order flow in 1998 (the year before EMU) to show that while the rate was flexible, order flow had persistent effects. After the May announcement of the conversion rates,...
The Microstructure Approach to Exchange Rates (2000)
Contents Preface Chapter 1: Overview of the Microstructure Approach 1.1 Three Approaches to FX: Goods, Assets, and Microstructure 1.2 Hallmarks of the Microstructure Approach 1.3 Overarching Themes...
The Price Impact of Currency Trades: Implications for Intervention (2000)
Richard K. Lyons, Richard K. Lyons
Central-bank intervention always introduces asymmetric information. There are no plausible, common-knowledge alternatives, regardless of intervention type (e.g announced vs. unannounced), and...
Order Flow and Exchange Rate Dynamics (1999)
Evans, Martin D., Lyons, Richard K.
Macroeconomic models of nominal exchange rates perform poorly. In sample, R 2 statistics as high as 10 percent are rare. Out of sample, these models are typically out-forecast by a naïve random...
Search Costs: The Neglected Spread Component (1999)
Mark D. Flood, Ronald Huisman, Kees G. Koedijk, Richard K. Lyons, Professor Mark Flood
Dealers need to search for quotes in many of the world's largest markets (such as spot foreign exchange, US government bonds, and the London Stock Exchange). This search affects trading cost. We...
Richard K. Lyons, Michael T. Melvin, Jel F, Professor Richard, K. Lyons
It is a common view that private information in the foreign exchange market does not exist. This paper provides evidence against this view. The evidence comes from the opening of lunch-hour trading...
Henry Cao Martin, Richard K. Lyons, Professor Richard, K. Lyons
When information about fundamentals is symmetric, can information-based trade still arise? Consider bond and FX markets, where private information about nominal cash flows is generally absent, but...
Is there private information in the FX market? The Tokyo experiment (1997)
Ito, Takatoshi, Lyons, Richard K., Melvin, Michael T.
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...
Is there private information in the FX market? The Tokyo experiment (1997)
Ito, Takatoshi, Lyons, Richard K., Melvin, Michael T.
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...
Three essays on exchange rate determination (1988)
Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1988.
Three essays on exchange rate determination (1988)
Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 1988.
Three essays on exchange rate determination / (1987)
Lyons, Richard K. (Richard Kent)
Supervised by Rudiger Dornbusch.
Explaining Forward Exchange Bias .... Intra-day
Lyons, Richard K, Rose, Andrew K
Intra-day interest rates are zero. Consequently, a foreign exchange dealer can short a vulnerable currency in the morning, close this position in the afternoon, and never face an interest cost. This...
Foreign exchange: macro puzzles, micro tools
This paper reviews recent progress in applying information-theoretic tools to long-standing exchange rate puzzles. I begin by distinguishing the traditional public information approach (e.g. monetary...
This paper develops a model for understanding end-user order flow in the FX market. The model addresses several puzzling findings. First, the estimated price-impact of flow from different end-user...
Do Currency Markets Absorb News Quickly?
This paper addresses whether macro news arrivals affect currency markets over time. The null from macro exchange-rate theory is that they do not: macro news is impounded in ex-change rates...
Meese-Rogoff Redux: Micro-Based Exchange Rate Forecasting
This paper compares the true, ex-ante forecasting performance of a micro-based model against both a standard macro model and a random walk. In contrast to existing literature, which is focused on...
Order Flow and Exchange Rate Dynamics
This paper presents an exchange rate model of a new kind. Instead of relying exclusively on macroeconomic determinants, the model includes a determinant from the field of microstructure financeorder...
Optimal Transparency in a Dealership Market with an Application to Foreign Exchange
This paper addresses the issue of optimal transparency in a multiple-dealer market. In particular, we examine the question: Would risk-averse dealers prefer ex-ante that signed order flow were...
External Economies and European Integration: The Potential for Self-fulfilling Expectations
Baldwin, Richard, Lyons, Richard K
It is often suggested that "European economic and monetary integration is important because people think it is". This paper is an exploratory attempt to formalize this idea. As the basis for our...
This paper develops a model for understanding end-user order flow in the FX market. The model addresses several puzzling findings. First, the estimated price-impact of flow from different end-user...
H. Henry Cao, Martin D. Evans, Richard K. Lyons
When information about fundamentals is symmetric, can information-based trade still arise? Consider bond and foreign exchange (FX) markets, where private information about nominal cash flows is...
Order Flow and Exchange Rate Dynamics
Macroeconomic models of nominal exchange rates perform poorly. In sample, R2 statistics as high as 10 percent are rare. Out of sample, these models are typically out-forecast by a na‹ve random...
An Information Approach to International Currencies
Richard K. Lyons, Michael J. Moore
This paper addresses currency competition from an information perspective. Transactions in traditional models do not convey information, so transaction costs -- the driver of competition outcomes --...
Explaining and Forecasting Exchange Rates with Order Flows
This paper summarizes key lessons learned from using models from microstructure finance to explain and forecast exchange rates. The first section is an executive summary, which outlines seven lessons...
Theoretical perspective on euro liquidity
I provide theoretical perspective on recent findings of increased transaction costs in the new dollar-euro market relative to the prior dollar-mark market, and assess the welfare significance of this...
New Perspective on FX Markets: Order-Flow Analysis.
Though fundamental and technical analysis are still widely used in foreign exchange markets, a new type of analysis has emerged: order-flow analysis. Order-flow analysis uses the flow of buy and sell...
Is There Private Information in the FX Market? The Tokyo Experiment
Takatoshi Ito, Richard K. Lyons, Michael T. Melvin
We provide evidence of private information in the foreign exchange market. The evidence comes from the introduction of trading in Tokyo over the lunch hour. Lunch-return variance doubles with the...
Explaining Forward Exchange Bias . . . Intraday.
Lyons, Richard K, Rose, Andrew K
Intraday interest rates are zero. Consequently, a foreign exchange dealer can short a vulnerable currency in the morning, close this position in the afternoon, and never face an interest cost. This...
Are Different-Currency Assets Imperfect Substitutes?
This paper provides a new test for whether different-currency assets are imperfect substitutes. The test exploits that under floating rates, changing public currency demand has no direct effect on...
Is there private information in the FX market? the Tokyo experiment
Takatosh Ito, Richard K. Lyons, Michael T. Melvin
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...
Foreign exchange: macro puzzles, micro tools
This paper reviews recent progress in applying information-theoretic tools to long-standing exchange rate puzzles. I begin by distinguishing the traditional public information approach (e.g.,...
Foreign exchange ; Prices
Profits and Position Control: A Week of FX Dealing.
This paper examines foreign exchange trading at the dealer level. The dealer we track averages $100,000 in profits per day on volume of $1 billion per day (or one basis point). The half-life of the...
Foreign Exchange Volume: Sound and Fury Signifying Nothing?
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...
Optimal Transparency in a Dealership Market with an Application to Foreign Exchange.
This paper addresses the issue of optimal transparency in a multiple-dealer market. In particular, we examine the question: Would risk-averse dealers prefer ex-ante that signed order flow were...
Tests of Microstructural Hypotheses in the Foreign Exchange Market.
This paper introduces a three-part transactions dataset to test various microstructural hypotheses about the spot foreign exchange market. In particular, we test for effects of trading volume on...
How is macro news transmitted to exchange rates?
Evans, Martin D.D., Lyons, Richard K.
Macro news can affect currency prices directly and indirectly via order flow. Past research shows that the direct effects of scheduled macro news account for less than 10% of daily price variance....
The Mutual Amplification Effect of Exchange Rate Volatility and Unresponsive Trade Prices
Richard Baldwin, Richard K. Lyons
The volatility of flexible exchange rates greatly exceeds what most analysts anticipated at the advent of generalized floating. The Dornbusch overshooting model accounts for the fact that exchange...
The Role of External Economies in U.S. Manufacturing
Ricardo J. Caballero, Richard K. Lyons
This paper develops a method for joint estimation of both the degree of internal returns to scale and the extent of external economies. We apply the method in estimating returns to scale indexes for...
Floating Exchange Rates in Peru, 1950-54
I test three potentially complementary models in an effort to capture the fundamentals that underlaid the market's determination of Peru's floating exchange rate through the period 1950-54: the first...
Short and Long Run Externalities
Eric J. Bartelsman, Ricardo J. Caballero, Richard K. Lyons
In this paper we build upon previous work on external economies in manufacturing [Caballero and Lyons (1989, 1990)] by providing new evidence helpful for discriminating between different types of...
Private Beliefs and Information Externalities in the Foreign Exchange Market
An information externality exists in the foreign exchange market due to the fact that traders play two partially conflicting roles: (i) each is a speculator and (ii) each is an information...
Tests of Microstructural Hypotheses in the Foreign Exchange Market
This paper introduces a three-part transactions dataset to test various microstructural hypotheses about the spot foreign exchange market. In particular, we test for effects of trading volume on...
Explaining Forward Exchange Bias..Intraday
Richard K. Lyons, Andrew K. Rose
Intraday interest rates are zero. Consequently, a foreign exchange dealer can short a vulnerable currency in the morning, close this position in the afternoon, and never face an interest cost. This...
Foreign Exchange Volume: Sound and Fury Signifying Nothing?
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...
Is There Private Information in the FX Market? The Tokyo Experiment
Takatoshi Ito, Richard K. Lyons, Michael T. Melvin
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...
Managers, Investors, and Crises: Mutual Fund Strategies in Emerging Markets
Graciela Kaminsky, Richard K. Lyons, Sergio Schmukler
This paper addresses the trading strategies of mutual funds in emerging markets. The data set we develop permits analysis of these strategies at the level of individual portfolios. Methodoloically, a...
Portfolio Balance, Price Impact, and Secret Intervention
This paper tests the portfolio-balance approach to exchange rate determination in a new way. Past work on portfolio balance in foreign exchange falls into two groups: (1) tests using measures of...
Fixed versus Flexible: Lessons from EMS Order Flow
William P. Killeen, Richard K. Lyons, Michael J. Moore
This paper addresses the puzzle of regime-dependent volatility in foreign exchange. We extend the literature in two ways. First, our microstructural model provides a qualitatively new explanation for...
How is Macro News Transmitted to Exchange Rates?
This paper tests whether macroeconomic news is transmitted to exchange rates via the transactions process and if so, what share occurs via transactions versus the traditional direct channel. We...
H. Henry Cao, Richard K. Lyons
In a market with symmetric information about fundamentals, can information-based trade still arise? Consider bond and FX markets, where private information about nominal cash flows is generally...
A New Micro Model of Exchange Rate Dynamics
We address the exchange rate determination puzzle by examining how information is aggregated in a dynamic general equilibrium (DGE) setting. Unlike other DGE macro models, which enrich either...
Exchange Rate Fundamentals and Order Flow
We address whether transaction flows in foreign exchange markets convey fundamental information. Our GE model includes fundamental information that first manifests at the micro level and is not...
Options and the Currency Risk Premium
This chapter uses implied volatilities to examine both the existence and form of the currency risk premium. First, I test for “simple efficiency”, under which there is no risk premium and...
Is There Private Information in the FX Market? The Tokyo Experiment
Takatoshi Ito, Richard K. Lyons, Michael T. Melvin
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 Microstructure Approach to Exchange Rates
Historically, the fields of exchange-rate economics and microstructure finance have progressed independently of each other. Recent interaction, however, has given rise to a microstructure approach to...