Intraday spot foreign exchange market. Analysis of efficiency, liquidity and volatility

Anna Serbinenko, Svetlozar T. Rachev

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


Spot foreign exchange market today is the most volatile and liquid of all financial markets in the world. The present paper addresses in detail the efficiency, liquidity and risk seen by a trader, particularly concentrating on the analysis of high frequency data for intraday trading. The main findings of the research include the fact that the market was found to be efficient in weak form, which in particular means that technical analysis cannot be successfully applied to systematically get an above average profit from speculative trades, but fundamental analysis may increase the expected income. Carry trades were not found to be consistently profitable or generating non negative profit. Spot foreign exchange market was proven to be extremely liquid, and its liquidity is being independent from regional trading sessions. We also found no evidence on the spot forex market of hot potato trading that usually follows news announcements. Finally, five different risk measures have shown that the trading based on high frequency data, e.g. minute data, is more risky than the trading using low frequency data, like daily data. The volatility of the market was shown to be increased in the first and the last thirty minutes of the corresponding regional equity trading session(s).

Original languageEnglish
Pages (from-to)35-45
Number of pages11
JournalInvestment Management and Financial Innovations
Issue number4
StatePublished - 2009


  • Expected tail loss
  • Foreign exchange market
  • Market efficiency
  • R-ratio
  • STARR ratio
  • Spot market


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