Empirical Economics

, Volume 49, Issue 4, pp 1431–1462 | Cite as

Informed traders’ arrival in foreign exchange markets: Does geography matter?

  • Ramazan Gençay
  • Nikola Gradojevic
  • Richard Olsen
  • Faruk Selçuk


This article critically investigates the possibility that private information offering systematic profit opportunities exists in the spot foreign exchange market. Using a unique dataset with trader-specific limit and market order histories for more than 10,000 traders, we detect transaction behavior consistent with the informed trading hypothesis, where traders consistently make money. We then work within the theoretical framework of a high-frequency version of a structural microstructure trade model, which directly measures the market maker’s beliefs. Both the estimates of the trade model parameters and our model-free analysis of the data suggest that the time-varying pattern of the probability of informed trading is rooted in the strategic arrival of informed traders on a particular day-of-week, hour-of-day, or geographic location (market).


Foreign exchange markets Volume Informed trading Noise trading 



We are grateful to Olsen Ltd. (, Switzerland for providing the data.


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Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  • Ramazan Gençay
    • 1
    • 2
  • Nikola Gradojevic
    • 2
    • 3
  • Richard Olsen
    • 4
    • 5
  • Faruk Selçuk
    • 6
  1. 1.Department of EconomicsSimon Fraser UniversityBurnabyCanada
  2. 2.The Rimini Centre for Economic AnalysisRiminiItaly
  3. 3.IÉSEG School of Management (LEM-CNRS)Lille Catholic UniversityLilleFrance
  4. 4.Olsen Ltd.ZurichSwitzerland
  5. 5.Centre for Computational Finance and Economic Agents (CCFEA)University of EssexEssexUK
  6. 6.Department of EconomicsBilkent UniversityBilkentTurkey

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