Turnover Spikes Have Little Impact On Spreads, Says Study
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Basle, Switzerland -- Unexpected trading activity in currencies seems to have no significant impact on the spreads between bid and ask prices, contrary to the predictions of so-called inventory cost models of spread behaviour.
That’s the conclusion of a study by Gabriele Galati, economist with the Basle-based Bank for International Settlements (BIS), which looks at the relationships between trading volumes, price volatility and spreads using the currencies of seven emerging market countries.
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