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Introducing False EUR and False EUR exchange rates

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  • Ausloos, M
  • Ivanova, K

Abstract

The Euro (EUR) is a new currency introduced by the European Community. Its exchange rate is very puzzling. We have invented a false Euro (FEUR) dating back to 1993 and have derived the exchange rates of the FEUR with respect to currencies not belonging to the EUR, i.e., DKK,CHF,JPY and USD. This allows us to search for correlations between the fluctuations preexisting to the introduction of EUR and present ones in such financial data. The detrended fluctuation analysis (DFA) statistical method is used. This leads to assume a power-law behavior, i.e., a scaling hypothesis, through an exponent α. The latter has demonstrated its usefulness for the investigations of long-range power-law correlations in several types of financial sequences. Our findings show that the α exponent interestingly characterizes fractional Brownian motion of the currency exchange rates between EUR and DKK over a 25 day interval, and usual Brownian motion otherwise and for the three other investigated exchange rates. We can devise an investment strategy based on the localα technique and obtain appreciable gains for the time being.

Suggested Citation

  • Ausloos, M & Ivanova, K, 2000. "Introducing False EUR and False EUR exchange rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 286(1), pages 353-366.
    • Handle: RePEc:eee:phsmap:v:286:y:2000:i:1:p:353-366
    DOI: 10.1016/S0378-4371(00)00328-9
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    5. Şahin, Gökhan & Erentürk, Murat & Hacinliyan, Avadis, 2009. "Detrended fluctuation analysis in natural languages using non-corpus parametrization," Chaos, Solitons & Fractals, Elsevier, vol. 41(1), pages 198-205.
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    8. Orłowski, A. & Struzik, Z.R. & Syczewska, E. & Załuska-Kotur, M.A., 2004. "Fluctuation dynamics of exchange rates on Polish financial market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 344(1), pages 184-189.
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    13. Mariani, M.C. & Florescu, I. & Beccar Varela, M.P. & Ncheuguim, E., 2010. "Study of memory effects in international market indices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(8), pages 1653-1664.
    14. Raul Matsushita & Andre Santos & Iram Gleria & Annibal Figueiredo & Sergio Da Silva, 2005. "Are Pound and Euro the Same Currency?," International Finance 0505002, University Library of Munich, Germany.
    15. Mariani, M.C. & Libbin, J.D. & Kumar Mani, V. & Beccar Varela, M.P. & Erickson, C.A. & Valles-Rosales, D.J., 2008. "Long correlations and Normalized Truncated Levy Models applied to the study of Indian Market Indices in comparison with other emerging markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(5), pages 1273-1282.
    16. Boilard, J.-F. & Kanazawa, K. & Takayasu, H. & Takayasu, M., 2018. "Empirical scaling relations of market event rates in foreign currency market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 509(C), pages 1152-1161.
    17. Sergio Da Silva, 2004. "International Finance, Levy Distributions, and the Econophysics of Exchange Rates," International Finance 0405018, University Library of Munich, Germany.
    18. Mohti, Wahbeeah & Dionísio, Andreia & Vieira, Isabel & Ferreira, Paulo, 2019. "Regional and global integration of Asian stock markets," Research in International Business and Finance, Elsevier, vol. 50(C), pages 357-368.
    19. Sidorov, S.P. & Faizliev, A.R. & Balash, V.A. & Korobov, E.A., 2016. "Long-range correlation analysis of economic news flow intensity," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 444(C), pages 205-212.
    20. Matsushita, Raul & Gleria, Iram & Figueiredo, Annibal & Da Silva, Sergio, 2007. "Are Pound and Euro the Same Currency? - Updated," MPRA Paper 1981, University Library of Munich, Germany.

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