Ian Marsh

Ian has worked in the City of London as an international banker and financial market economist, for the IMF, and in academia. He has been at Cass since 1998 but was on leave of absence at the Bank of England between June 2001 and September 2003 where he managed a research team focusing on capital market issues. His research interests are credit risk transfer markets and the market for foreign exchange.

Research

My recent research has been in three main areas:

• 1. Macroeconomic exchange rate modelling. Macroeconomic theory cannot explain well the month-to-month behaviour of major exchange rates. However, it does better in explaining long term equilibria (Marsh, Passari and Sarno, 2012) and in predicting crises and regime change (Hallwood, MacDonald and Marsh, 2010 and 2012).
• 2. Microstructure of FX and equity markets. While macroeconomic variables have limited success in explaining exchange rate movements, microeconomic variables, especially the order flow of informed customers, can explain and even predict prices. I have extended our understanding of this through work with two PhD students. First, we take this approach to emerging markets with the first analysis of African exchange rate markets (Duffuor, Marsh and Phylaktis, 2012) and show that the same relationships hold even in under-developed FX markets. In Marsh and Miao (2012) we show that orders in FX markets are relevant also for equity valuation, and are therefore likely to contain fundamental information rather than being transient and liquidity-related. Market design, regulations and policy decisions impact the effectiveness of financial markets. My work has investigated how two major regulation/policy changes affected markets. The imposition of bans on short-selling financial stocks in the UK at the height of the recent crisis impaired efficiency with no noticeable gains (March and Payne, 2012). This paper won considerable attention in the press including coverage in FT and several EU financial newspapers, and in the practitioner community (it was awarded the Inquire prize for research). Second, intervention by Japanese authorities, while of only limited use in stemming the yen's appreciation, did disrupt the workings of the FX market sufficiently to break down the usual relationship between end-user transactions in the market and spot prices.
• 3. Credit derivatives markets. In ongoing research with Wagner of Tilburg University, I examine the operation of the credit default swap market. We show that the price at which this market allows default risk to be insured follows a pattern also observed in goods (especially gasoline) markets - namely, prices rise rapidly on bad news yet only fall slowly on good news. We expalin this as the reaction of profit maximising but less the fully competitive intermediaries who can exploit uninformed couterparties and extract a higher than warranted price following good news.

Research Topics

Foreign exchange market microstructure

Analysis of the roles played by customer and interbank order flows in the determination of foreign exchange rates.

Credit risk markets

How are prices in credit derivatives market set? My research suggests they lead prices in other credit markets but lag prices in equities. This lag is only manifest following good economic news, however, and is suggested of market inefficiencies related to imperfect competition.

Computer-based trading in equity markets

Electronic trading is now dominant in financial markets. I investigate how the impact of such computer-based trading varies in the cross-section of UK stocks and show how this relates to the effectiveness of price determination in equity markets.

Qualifications

B.Sc. (Sheffield), M.Sc. (Birkbeck) and PhD (Economics; Strathclyde).

Award

• INQUIRE (2011) Inquire prize for research
• Inquire prize for research, awarded for paper on Banning Short Sales and Market Quality: the UK’s experience, co-authored with Richard Payne.

Languages

Italian.

Expertise

Primary Topics

• Capital Markets
• Econometric & Statistical Methods
• Finance
• Financial Econometrics
• Financial Economics
• Financial Markets
• International Finance
• International Financial Markets

Book

• James, J., Sarno, L. and Marsh, I. (Eds.), (2012). Handbook of Exchange Rates. Wiley. ISBN 978-0-470-76883-9.
• Marsh, I. and MacDonald, R. (1999). Exchange Rate Modelling. Boston: Springer. ISBN 978-0-7923-8668-1

Chapters (12)

• Marsh, I.W. and Miao, T. (2016). High-frequency information content in end-user foreign exchange order flows. High Frequency Trading and Limit Order Book Dynamics (pp. 133–152). ISBN 978-1-317-57076-9.
• Marsh, I.W., Passari, E. and Sarno, L. (2012). Purchasing Power Parity in Tradable Goods. In James, J., Marsh, I.W. and Sarno, L. (Eds.), Handbook of Exchange Rates Wiley.
• Hallwood, C.P., Macdonald, R. and Marsh, I.W. (2012). Crash! expectational aspects of the UK’s and the U.S.’s departures from the inter-war gold standard. In Bordo, M.D. and MacDonald, R. (Eds.), Credibility and the International Monetary Regime: A Historical Perspective (pp. 116–132). Cambridge University Press. ISBN 978-1-139-04584-1.
• Hallwood, C.P., Macdonald, R. and Marsh, I.W. (2012). Credibility and fundamentals: Were the classical and inter-war gold standards well-behaved target zones? In Bordo, M.D. and MacDonald, R. (Eds.), Credibility and the International Monetary Regime: A Historical Perspective (pp. 17–45). Cambridge: Cambridge University Press. ISBN 978-0-521-81133-0.
• Paul Hallwood, C., Macdonald, R. and Marsh, I.W. (2012). Did impending war in Europe help destroy the gold bloc in 1936? An internal inconsistency hypothesis. In Bordo, M.D. and MacDonald, R. (Eds.), Credibility and the International Monetary Regime: A Historical Perspective (pp. 133–150). Cambridge University Press. ISBN 978-1-139-04584-1.
• Hallwood, C.P., Marsh, I.W. and MacDonald, R. (2012). Realignment expectations and the US dollar, 1890–7: was there a peso problem? In Bordo, M.D. and MacDonald, R. (Eds.), Credibility and the International Monetary Regime A Historical Perspective (pp. 71–88). Cambridge University Press. ISBN 978-0-521-81133-0.
• Marsh, I., Hallwood, P. and MacDonald, R. (2010). THE GOLD BLOC: DID IMPENDING WAR IN EUROPE HELP DESTROY THE GOLD BLOC IN 1936? AN INTERNAL INCONSISTENCY HYPOTHESIS. In MacDonald, R. and Bordo, M. (Eds.), Credibility and the International Monetary Regime: An Historical Perspective Cambridge: CUP.
• Marsh, I., Hallwood, P. and Scheibe, J. (2005). Economic Shocks and Choice of Currency Area: The Case of Argentina, 1991-2002. In Sinclair, P.J.N., Driver, R. and Thoenissen, C. (Eds.), Exchange rates and capital flows (pp. 77–97). London: Routledge.
• Marsh, I. and Phylaktis, K. (2003). The International Monetary Fund: Past, Present and Future. In Mullineux, A.W. and Murinde, V. (Eds.), Handbook of International Banking (pp. 699–720). Edward Elgar. ISBN 978-1-84064-093-9.
• Marsh, I. (2002). What central banks can learn about default risk from credit markets. Market functioning and central bank policy (BIS Papers No 12) (pp. 329–339). Basel, Switzerland: Bank for International Settlements ISBN 92-9131-636-9.
• Hallwood, P., MacDonald, R. and Marsh, I. (1996). Credibility and Fundamentals: Was the Gold Standard a Well-Behaved Target Zone? In Bayoumi, T., Eichengreen, B. and Taylor, M.P. (Eds.), Modern Perspectives on the Gold Standard (pp. 129–164). Cambridge University Press.
• Marsh, I.W. and MacDonald, R. (1994). On Long- and Short-Run Purchasing Power Parity. In Kaehler, J. and Kugler, P. (Eds.), Econometric Analysis of Financial Markets (pp. 23–46). Physica-Verlag HD. ISBN 978-3-642-48668-5

Journal Articles (34)

• Marsh, I.W., Rincon, A., Vecchi, M. and Venturini, F. (2017). We see ICT spillovers everywhere but in the econometric evidence: a reassessment. Industrial and Corporate Change . doi:10.1093/icc/dtx008.
• Marsh, I.W. and Wagner, W. (2016). News-Specific Price Discovery in Credit Default Swap Markets. Financial Management, 45(2), pp. 315–340. doi:10.1111/fima.12095.
• Hayley, S. and Marsh, I.W. (2016). What do retail FX traders learn? Journal of International Money and Finance, 64, pp. 16–38. doi:10.1016/j.jimonfin.2016.02.001.
• Zhang, G., Marsh, I. and MacDonald, R. (2016). A hybrid approach to exchange rates. Studies in Economics and Finance, 33(1), pp. 50–68. doi:10.1108/SEF-10-2014-0185.
• Iwatsubo, K. and Marsh, I.W. (2014). Order flows, fundamentals and exchange rates. International Journal of Finance and Economics, 19(4), pp. 251–266. doi:10.1002/ijfe.1490.
• James, J., Marsh, I.W. and Sarno, L. (2012). Preface. Handbook of Exchange Rates . doi:10.1002/9781118445785.
• Marsh, I.W. and Miao, T. (2012). High-frequency information content in end-user foreign exchange order flows. European Journal of Finance, 18(9), pp. 865–884. doi:10.1080/1351847X.2011.601652.
• Duffuor, K., Marsh, I.W. and Phylaktis, K. (2012). Order flow and exchange rate dynamics: An application to emerging markets. International Journal of Finance and Economics, 17(3), pp. 290–304. doi:10.1002/ijfe.451.
• Marsh, I.W. and Payne, R. (2012). Banning short sales and market quality: The UK's experience. Journal of Banking and Finance, 36(7), pp. 1975–1986. doi:10.1016/j.jbankfin.2012.03.005.
• Marsh, I.W. (2011). Order flow and central bank intervention: An empirical analysis of recent Bank of Japan actions in the foreign exchange market. Journal of International Money and Finance, 30(2), pp. 377–392. doi:10.1016/j.jimonfin.2010.10.001.
• Marsh, I.W. and Paul Hallwood, R.M. (2011). Remilitarization and the End of the Gold Bloc in 1936. De Economist, 159(3), pp. 305–321. doi:10.1007/s10645-011-9160-y.
• Hawkesby, C., Marsh, I.W. and Stevens, I. (2007). Comovements in the equity prices of large complex financial institutions. Journal of Financial Stability, 2(4), pp. 391–411. doi:10.1016/j.jfs.2006.12.001.
• Wagner, W. and Marsh, I.W. (2006). Credit risk transfer and financial sector stability. Journal of Financial Stability, 2(2), pp. 173–193. doi:10.1016/j.jfs.2005.11.001.
• Hallwood, P., Marsh, I.W. and Scheibe, J. (2006). An assessment of the case for monetary union or official dollarization in five Latin American countries. Emerging Markets Review, 7(1), pp. 52–66. doi:10.1016/j.ememar.2005.12.001.
• Marsh, I.W. and Wagner, W. (2006). Credit risk transfer and financial sector stability. Journal of Financial Stability, 2, pp. 173–193.
• Marsh, I.W. (2006). Order Flow and Central Bank Intervention: An Empirical Analysis of Recent Bank of Japan Actions in the Foreign Exchange Market. SSRN . doi:10.2139/ssrn.942805.
• [publisher’s website]
• Blanco, R., Brennan, S. and Marsh, I.W. (2005). An empirical analysis of the dynamic relation between investment-grade bonds and credit default swaps. Journal of Finance, 60(5), pp. 2255–2281. doi:10.1111/j.1540-6261.2005.00798.x.
• Cheung, Y.W., Chinn, M.D. and Marsh, I.W. (2004). How do UK-based foreign exchange dealers think their market operates? International Journal of Finance and Economics, 9(4), pp. 289–306. doi:10.1002/ijfe.252.
• Hallwood, C.P. and Marsh, I.W. (2004). Exchange market pressure on the pound-dollar exchange rate: 1925-1931. North American Journal of Economics and Finance, 15(2), pp. 249–264. doi:10.1016/j.najef.2004.01.002.
• MacDonald, R. and Marsh, I.W. (2004). Currency spillovers and tri-polarity: A simultaneous model of the US dollar, German mark and Japanese yen. Journal of International Money and Finance, 23(1), pp. 99–111. doi:10.1016/j.jimonfin.2003.08.003.
• Marsh, I., Hawkesby, C. and Stevens, I. (2003). Large Complex Financial Institutions: Common Influences on Asset Price Behaviour? Financial Stability Review, 2003(15), pp. 124–134.
• Marsh, I., Cortes, F. and Lyon, M. (2002). Is There Still Magic in Corporate Earnings? Financial Stability Review, 2002(13), pp. 142–152.
• Paul Hallwood, C., MacDonald, R. and Marsh, I.W. (2000). Realignment expectations and the US dollar, 1890–1897: Was there a ‘Peso problem’? Journal of Monetary Economics, 46(3), pp. 605–620. doi:10.1016/S0304-3932(00)00040-4.
• Hallwood, P., MacDonald, R. and Marsh, I.W. (2000). An Assessment of the Causes of the Abandonment of the Gold Standard by the U. S. in 1933. Southern Economic Journal, 67(2), pp. 448–448. doi:10.2307/1061480.
• Marsh, I.W. (2000). High-frequency Markov switching models in the foreign exchange market. Journal of Forecasting, 19(2), pp. 123–134. doi:10.1002/(SICI)1099-131X(200003)19:23.0.CO;2-C.
• MacDonald, R. and Marsh, I.W. (1997). On Fundamentals And Exchange Rates: A Casselian Perspective. The Review of Economics and Statistics, 79(4), pp. 655–664.
• Hallwood, C.P., MacDonald, R. and Marsh, I.W. (1997). Crash! Expectational Aspects of the Departures of the United Kingdom and the United States from the Inter-War Gold Standard. Explorations in Economic History, 34(2), pp. 174–194. doi:10.1006/exeh.1997.0668.
• Marsh, I.W. and Tokarick, S.P. (1996). An assessment of three measures of competitiveness. Weltwirtschaftliches Archiv, 132(4), pp. 700–722. doi:10.1007/BF02707590.
• Macdonald, R. and Marsh, I.W. (1996). Currency forecasters are heterogeneous: confirmation and consequences. Journal of International Money and Finance, 15(5), pp. 665–685. doi:10.1016/0261-5606(96)00030-7.
• Marsh, I.W. and Power, D.M. (1996). A note on the performance of foreign exchange forecasters in a portfolio framework. Journal of Banking & Finance, 20(3), pp. 605–613. doi:10.1016/0378-4266(95)00007-0.
• Marsh, I. and MacDonald, R. (1996). Forecaster Heterogeneity: An Investigation of the Expectations of Foreign Exchange Forecasters (in French). Economie et Prevision, 125 .
• Macdonald, R. and Marsh, I.W. (1994). Combining exchange rate forecasts: What is the optimal consensus measure? Journal of Forecasting, 13(3), pp. 313–332. doi:10.1002/for.3980130306.
• Ronald, M. and Ian, M. (1993). On the efficiency of oil price forecasts. Applied Financial Economics, 3(4), pp. 293–302. doi:10.1080/758534940.
• Marsh, I.W. and MacDonald, R. (1993). The Efficiency Of Spot And Futures Stock Indices: A Survey Based Perspective. Review of Futures Markets, 12(2), pp. 431–454

Course Directorship

• 2008 - 2010, MSc Finance, Director
• 2011 - present, PhD Finance, Director
• 1999 - 2001, BSc Banking and International Finance, Director

Editorial Activities (4)

• Review of Economics and Institutions, Member of Editorial Board, 2010 – present.
• Journal of Banking and Finance, Referee, 2009 – present.
• Journal of Financial Economics, Referee, 2009 – present.
• Review of Financial Studies, Referee, 2008 – present.