文档介绍：Is There Private Information in the FX Market?
The Tokyo Experiment

Takatoshi Ito* 

Richard K. Lyons

Michael T. Melvin

This draft: July 1996

Abstract

It is mon view that private information in the foreign exchange market
does not exist. We provide evidence against this view. The es from
the introduction of trading in Tokyo over the lunch-hour. Lunch-hour return
variance doubles with the introduction of trading, which cannot be due to public
information since the flow of public information did not change with the trading
rules. Having eliminated public information as the cause, we exploit the volatil-
ity pattern over the whole day to discriminate between the two alternatives: pri-
vate information and pricing errors. Three key results support the predictions
of private-information models. First, the volatility U-shape flattens: greater
revelation over lunch leaves a smaller share for the morning and afternoon.
Second, the U-shape tilts upward, an implication of private information that is
transitory in nature. Finally, there is a clear U-shape in the morning when
Tokyo closes over lunch which disappears with the lunch-hour opening as a full-
day U-shape is established.

Correspondence
Professor Richard K. Lyons
Haas School of Business, UC Berkeley
Berkeley, CA 94720-1900
Tel: 510-642-1059, Fax: 510-643-1420
E-mail: ******@

*  Respective affiliations are Hitotsubashi University, IMF, and NBER; UC Berkeley and NBER; and
Arizona State University. We thank the following for ments: Jeff Frankel, Andy Rose, and
seminar participants at Santa Cruz, LSE, Berkeley, and FRBNY. Lyons thanks the National Science
Foundation and the Berkeley Program in Finance for financial assistance.
Is There Private Information in the FX Market?
The Tokyo Experiment

1. Introduction
It is mon view that all participants in the for