Short-term horizons in foreign exchange? Survey evidence from dealers and fund managers

The paper examines the extent and determinants of short-term horizons in ta king open positions using a questionnaire mailed to professional foreign ex change market participants in Germany. The findings reveal that the absolut e anticipation horizon is short, but not necessarily short-termist. Another related but empirically different measure is proposed based on the relativ e length of different horizons; its use clearly shows widespread restrictio ns in relation to optimal behavior. No determinants in personal characteris tics were established for either empirical measure; rather the institutiona l environment was found to be an influence. Thus, professionals may adapt r ationally to their incentive structure, which works towards short-term hori zons in position taking.