Exchange Rate Determination and Forecasting: Can the Microstructure Approach Rescue Us from the Exchange Rate Disparity?
Table 8
Granger’s causality estimation of (6) (10-minute frequency).
Day 1
Day 2
Day 3
Day 4
Day 5
Order flow
L1
0.136435 (0.34967)
−0.089633 (0.26324)
0.526039 (0.30753)
−0.447771 (0.36917)
−0.446635 (0.30271)
L2
−0.308135 (0.35084)
−0.263654 (0.26533)
0.091605 (0.28730)
−0.401649 (0.37418)
−0.404804 (0.28665)
L3
0.688376 (0.33985)
0.209682 (0.26306)
−0.326159 (0.29723)
0.702109 (0.37023)
0.184541 (0.28903)
L4
−0.039688 (0.33378)
−0.481917 (0.26637)
0.235170 (0.29056)
0.272496 (0.37699)
−0.180359 (0.30057)
L5
0.035736 (0.32321)
0.214257 (0.25365)
−0.150053 (0.26986)
−0.086382 (0.37463)
0.153250 (0.28587)
Exchange rate return
L1
−0.191310 (0.32897)
0.231504 (0.28081)
−0.429302 (0.30579)
0.570028 (0.26693)
0.223603 (0.29134)
L2
0.196840 (0.33985)
0.287834 (0.28982)
−0.283998 (0.30125)
0.312146 (0.27584)
0.268175 (0.26696)
L3
−0.642743 (0.32175)
−0.265260 (0.31380)
0.201120 (0.31266)
−0.582852 (0.26878)
−0.262002 (0.27343)
L4
−0.036487 (0.31441)
0.392224 (0.30960)
−0.266103 (0.29923)
0.047003 (0.27626)
0.169784 (0.28404)
L5
−0.132261 (0.30469)
−0.000436 (0.30732)
0.043512 (0.29192)
−0.256454 (0.27060)
−0.308772 (0.27394)
Constant
10.20020 (10.1838)
−0.338317 (8.30204)
−11.89428 (8.39075)
−6.790016 (11.6759)
16.56448 (11.4245)
Adjusted -sq
−0.040912
−0.023319
−0.066581
0.157572
0.028411
-statistic
0.791690
0.879226
0.669151
1.991340
1.154979
value
0.6368
0.5592
0.7462
0.0583
0.3465
This table reports the results of the regressions of the exchange rate return at the 10-minute frequency on five lags of order flow and five lags of exchange rate returns over the five days in the sample. Standard errors are reported in the parentheses below the coefficient estimates. The -statistics and value are from the -tests, which indicate lagged order flow coefficients are not jointly different from zero.