Intraday momentum in FX markets: Disentangling informed trading from liquidity provision

摘要

We examine the likely drivers of intraday momentum, defined as a significantly positive relation between the first half-hour and the last half-hour return, in a foreign exchange market with explicit trading hours. Using transaction-level data from the Moscow Interbank Currency Exchange on the RUB-USD currency pair for the 2005-2014 period, our results suggest that intraday momentum in the ruble market is induced by risk aversion to overnight holdings among liquidity providers. In addition, our results complement earlier findings that suggest that market concentration due to trading hours matters for intraday momentum and that the effect is more pronounced during financial crises. (C) 2016 Elsevier B.V. All rights reserved.