order flow and exchange rate dynamics（订单流和汇率动态）.pdf

Research Program in Finance UC Berkeley Title: Order Flow and Exchange Rate Dynamics Author: Evans, Martin D., Georgetown University and NBER Lyons, Richard K., Haas School of Business, University of California, Berkeley Publication Date: 08-01-1999 Series: Recent Work Publication Info: Recent Work, Research Program in Finance, Institute of Business and Economic Research, UC Berkeley Permalink: /uc/item/0dh1c16w Keywords: Order Flow, Exchange Rate, Microstructure, Fundamentals, and Forecasting Abstract: 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 walk. This paper presents a model of a new kind. Instead of relying exclusively on macroeconomic determinants, the model includes a determinant from the field of microstructure-order flow. Order flow is the proximate determinant of price in all microstructure models. This is a radically different approach to exchange rate determination. It is also strikingly successful in accounting for realized rates. Our model of daily exchange-rate changes produces R 2 statistics above 50 percent. Out of sample, our model produces significantly better short-horizon forecasts than a random walk. For the DM/$ spot market as a whole, we find that $1 billion of net dollar purchases increases the DM price of a dollar by about 1 pfennig. eScholarship provides open access, scholarly publishing services to the University of California and delivers a dynamic research platform to scholars worldwide. Order Flow and Exchange Rate Dynamics