Title: Random walk or a run
Description: "Using tick-by-tick data of the dollar-yen and euro-dollar exchange rates recorded in the actual transaction platform, a "run" -- continuous increases or decreases in deal prices for the past several ticks -- does have some predictable information on the direction of the next price movement.  Deal price movements, that are consistent with order flows, tend to continue a run once it started i.e., conditional probability of deal prices tend to move in the same direction as the last several times in a row is higher than 0.5.  However, quote prices do not show such tendency of a run.  Hence, a random walk hypothesis is refuted in a simple test of a run using the tick by tick data.  In addition, a longer continuous increase of the price tends to be followed by larger reversal.  The findings suggest that those market participants who have access to real-time, tick-by-tick transaction data may have an advantage in predicting the exchange rate movement.  Findings here also lend support to the momentum trading strategy"--National Bureau of Economic Research web site.