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The informational efficiency of the yen/dollar exchange rate is investigated in five market segments within each business day from 1987 to 2007. Among the results, we first find that the daily exchange rate has a cointegrating relationship with the cumulative price change of the segment for which the London and New York (NY) markets are both open, but not with that of any other segments. Second, the cumulative price change of the London/NY segment is the most persistent among the five market segments in the medium and long run. These results suggest that the greatest concentration of informed traders is in the London/NY segment, where intraday transactions are the highest. This is consistent with the theoretical prediction by Admati and Pfleiderer (1988) that prices are more informative when trading volume is heavier.
