Market data good predictor of FX swings – BoJ research
Paper examines trade repository information in foreign currency markets
Analysing market participants’ perceptions significantly improves predictions of foreign exchange volatility, according to research published by the Bank of Japan on May 29.
The paper, Heterogeneous Views and Currency Swing Prediction: Evidence from Trade Repository Data, applies a regression model to trade repository data – including the perception of currency risk – and finds that this enables more accurate predictions of FX volatility. “Our findings suggest that large currency swings are
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