Our previous analysis of tick-by-tick interbank foreign exchange (FX) rates has suggested that the market is not efficient on short time scales. We find that the price changes show mean-reverting rather than random-walk behavior (Moody and Wu, 1994). The results of rescaled range and Hurst exponent analysis presented in the first part of this paper further confirms the mean-reverting attribute in the FX data. The second part of this paper reports on the highly significant correlations between Bid/Ask spreads, volatility and forecastability found in the FX data. These interactions show that higher volatility results in higher forecast error and increased risk for market makers, and that, to compensate for this increase in risk, market makers increase their Bid/Ask spreads.
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机译：我们之前对逐笔银行间外汇（FX）汇率的分析表明，市场在短期内效率不高。我们发现，价格变化表现为均值回复而非随机游走（Moody and Wu，1994）。本文第一部分中提出的重新定标范围和Hurst指数分析的结果进一步证实了FX数据中的均值回复属性。本文的第二部分报告了外汇数据中的买/卖价差，波动率和可预测性之间的高度相关性。这些相互作用表明，较高的波动性会导致较高的预测误差和对做市商的风险，并且，为了弥补这种风险的增加，做市商会增加其买/卖价差。
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