The research design of this thesis is best described as a grounded theory approach to structure the gathered data. According to Finch (2002), novel knowledge claims can be formulated within economics by employing grounded theory procedures.
However, grounded theory procedures will not be followed in the most rigid manner in order to avoid the dangers outlined in above sections. In other words, a partial grounded theory approach will be adopted. There is however a major shortfall associated with partial grounded theory. According to Strauss and Corbin, ‘the nature of relationships between categories (or concepts) is not undertaken; at least, it is not explained sufficiently in write-ups. . (Strauss and Corbin 1990:7)
The aim of the researcher is to take into account the dangers associated with a partly grounded theory method by giving detailed descriptions of the relationships of concepts.
122 The decisive factor for choosing a Grounded theory approach is the fact that it is compatible with the choice of epistemology of this study, while offering a structured framework to analyze qualitative data. Grounded theory approaches allow for collection of a wide source of data including both qualitative and quantitative data. Moreover it allows for an interplay between induction and deduction and most importantly it allows an in-depth investigation of foreign exchange market participants views by examining their beliefs and behavioural patterns.
First, in order to investigate market participants’ views on the workings of the foreign exchange market, news reports with foreign exchange market related market commentary have been gathered. Approximately one thousand foreign exchange market commentary reports published by Reuters Group PLC over a six month period starting 1/5/2007 and ending on 31/10/2007. The particular source of news reports has been chosen because of Reuters long standing reputations for objectivity, accuracy and validity. We also examined a considerable number of news reports issued by Thomson Corporation in order to assess whether news reports issued by different providers reveal significantly different views of market participants on the foreign exchange market, however, no evidence has been found that this might be the case. The specific sample period has been chosen based on a number of factors. First, no 2007 reports are accessible through the Reuters website; as such a pre-2007 period did not represent a realistic alternative. Second, the chosen sample period includes both, periods of market turmoil and periods of stability, whereas most post-2007 periods are characterized by volatile markets. Hence, we are able to investigate market practitioners during both volatile and stable market conditions as well as the transmission from stability to instability. The duration of the sample period was six months as a shorter period would limit our ability to examine market practitioners views during changing market
123 conditions, whereas a longer period would consume considerable more time with only doubtful benefits to the additional insights obtained.
News reports concerning the foreign exchange market were easy to distinguish from other market news reports as their labeling began with the word ‘FOREX’. FOREX news report (reports thereafter) are issued by Reuter on a 24 hour basis with commentary from all major financial centers. Most reports were issued from Reuters offices in London, New York and Tokyo, but included market commentary that was not specific to the issuing office’s location.
In fact, there was a considerable amount of repetition between reports issued within a few hours, even though these were issued by different authors in different locations. The reports included the authors description of issues concerning the foreign exchange market as well as quotes from major market practitioners such as foreign exchange strategists employed by the major commercial and investment banks, Central bank announcements, foreign exchange brokers, traders, and government officials.
The first step of the analysis was the part of the process referred to as open coding of the data.
In open coding the phenomena and events found in the text are categorized, named and their properties are specified. The objective here is to create abstract concepts emerging from the descriptions in the text.
As we progressed with the process of open coding we began the part of the process referred to as axial coding. In axial coding the objective is to identify the relationships between the different categories identified during open coding. As we progressed with the analysis the
124 aim was to constantly examine whether the identified relationships were found again in later reports. When relationships were found not to appear at a high frequency in data and/or there appeared to be limited evidence of a significant impact, and/or appeared to be of little relevance to the aim of this study, then those relationships were omitted in further analysis. In addition, relationships that appeared frequently but were not likely to impact exchange rates in the future (i.e. events specific to the time period of investigation) have been also omitted.
We then turned to undertake the process of selective coding, where all other categories (including the relationships between the categories) are linked to the main category referred to as core category.
After identifying relationships affecting short term exchange rate behavior, based on market practitioners’ views, the researcher proceeded to test the theory against empirical data in order to assess the validity and generalisability of findings. For this purpose we employed quantitative data and conducted (in most cases28) formal statistical tests. A detailed description of statistical analysis tools and data employed are can be found in each of the relevant chapters (Chapter V, VI).
28 Because the data required to conduct a formal tests for one of our identified relationships was not available, we utilized results from other studies to gain further insight on the empirical validity and generalisability of the observed relationship.
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