The Rise of Fund Managers in Foreign Exchange

37 Pages Posted: 26 Jan 2005

See all articles by Thomas Gehrig

Thomas Gehrig

University of Vienna

Lukas Menkhoff

Kiel Institute for the World Economy; German Institute for Economic Research (DIW Berlin); Humboldt-Universität zu Berlin

Date Written: October 2004

Abstract

This Paper analyzes the behavior and motivation of fund managers in foreign exchange markets reflected in questionnaire evidence. We find that fund managers and FX dealers differ significantly. Fund managers rely more on fundamentals, basically due to their longer forecasting horizons, and reject non-fundamental influences on exchange rates more than FX dealers. Neither can fund managers be considered as pure fundamentalists, however. Non-fundamentalist positions markedly influence short-term decision-making. They inspire ambivalent views about market imperfections and these views seem to become stronger over time. This latter change counterbalances the strengthening fundamental influences resulting from the rise of fund managers.

Keywords: Foreign exchange, market microstructure, fund management, fundamentals

JEL Classification: F31, G23

Suggested Citation

Gehrig, Thomas and Menkhoff, Lukas, The Rise of Fund Managers in Foreign Exchange (October 2004). Available at SSRN: https://ssrn.com/abstract=654622

Thomas Gehrig (Contact Author)

University of Vienna ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

Lukas Menkhoff

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Humboldt-Universität zu Berlin ( email )

Humboldt Universität
Unter den Linden 6
Berlin, 10099
Germany

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