Price Clustering in the FX Market: A Disaggregate Analysis Using Central Bank Intervention

36 Pages Posted: 22 Sep 2004

See all articles by Andreas M. Fischer

Andreas M. Fischer

Swiss National Bank; Centre for Economic Policy Research (CEPR)

Date Written: August 2004

Abstract

Price clustering is a well-documented regularity of foreign exchange transactions. In this Paper, I present new empirical evidence of price clustering for central bank interventions. A feature of the price clustering in Swiss National Bank (SNB) transactions is market dependency. Evidence of clustering in the broker market is considerably smaller than in the dealer market. The empirical analysis for Swiss interventions uses a disaggregate approach to test the hypothesis whether intervention strategy matters. The most important determinants of price clustering are bank size and transaction volume. While the regression evidence for customer transactions is consistent with the efficiency hypothesis, the clustering results for intervention trades are not influenced by the SNB's intervention tactics.

Keywords: Central bank interventions, intervention strategy, clustering

JEL Classification: E31, E33

Suggested Citation

Fischer, Andreas M., Price Clustering in the FX Market: A Disaggregate Analysis Using Central Bank Intervention (August 2004). Available at SSRN: https://ssrn.com/abstract=594362

Andreas M. Fischer (Contact Author)

Swiss National Bank ( email )

Borsenstrasse 15
CH-8022 Zurich
Switzerland
+41 1 631 3294 (Phone)
+41 1 631 3901 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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