Home > Research > Publications & Outputs > The information content of retail investors' or...

Electronic data

  • _paper

    Accepted author manuscript, 284 KB, PDF document

    Available under license: CC BY: Creative Commons Attribution 4.0 International License


Text available via DOI:

View graph of relations

The information content of retail investors' order flow

Research output: Contribution to Journal/MagazineJournal articlepeer-review

<mark>Journal publication date</mark>2016
<mark>Journal</mark>European Journal of Finance
Issue number2
Number of pages25
Pages (from-to)80-104
Publication StatusPublished
Early online date24/11/14
<mark>Original language</mark>English


In this paper, we provide evidence that the trading activity of small retail investors carries significant genuine information that can be exploited for the short-term out-of-sample forecasting of foreign exchange rates. Our findings are based on a unique dataset of around 2000 retail investors from the OANDA FXTrade electronic trading platform. Our results are consistent with the view that in the foreign exchange market private information is highly dispersed, but can be extracted by observing customer order flow. Previous studies, however, focused on the information content of costumer order flow of dealers in the interbank market, whose clients are themselves large institutional and professional investors. Our study is the first that analyzes a crowd of small retail investors and shows that even the trading activity of these investors contains, on aggregate, important non-public information that can be exploited for short-term exchange rate forecasting. Our findings lead us to conjecture that retail investors (on aggregate) are not pure noise traders but process dispersed information at least partially in a similar way as large institutional investors and hence place their orders accordingly.