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Fluctuation scaling of quotation activities in the foreign exchange market

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  • Sato, Aki-Hiro
  • Nishimura, Maiko
  • Hołyst, Janusz A.

Abstract

We study the scaling behavior of quotation activities for various currency pairs in the foreign exchange market. The components’ centrality is estimated from multiple time series and visualized as a currency pair network. The power-law relationship between a mean of quotation activity and its standard deviation for each currency pair is found. The scaling exponent α and the ratio between common and specific fluctuations η increase with the length of the observation time window Δt. The result means that although for Δt=1(min), the market dynamics are governed by specific processes, and at a longer time scale Δt>100(min) the common information flow becomes more important. We point out that quotation activities are not independently Poissonian for Δt=1(min), and temporally or mutually correlated activities of quotations can happen even at this time scale. A stochastic model for the foreign exchange market based on a bipartite graph representation is proposed.

Suggested Citation

  • Sato, Aki-Hiro & Nishimura, Maiko & Hołyst, Janusz A., 2010. "Fluctuation scaling of quotation activities in the foreign exchange market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(14), pages 2793-2804.
    • Handle: RePEc:eee:phsmap:v:389:y:2010:i:14:p:2793-2804
    DOI: 10.1016/j.physa.2010.03.002
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    References listed on IDEAS

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    1. Alfarano, Simone & Lux, Thomas & Wagner, Friedrich, 2006. "Estimation of a simple agent-based model of financial markets: An application to Australian stock and foreign exchange data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 370(1), pages 38-42.
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    Cited by:

    1. Wang, Yanjun & Zhang, Qiqian & Zhu, Chenping & Hu, Minghua & Duong, Vu, 2016. "Human activity under high pressure: A case study on fluctuation scaling of air traffic controller’s communication behaviors," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 441(C), pages 151-157.
    2. Chołoniewski, Jan & Chmiel, Anna & Sienkiewicz, Julian & Hołyst, Janusz A. & Küster, Dennis & Kappas, Arvid, 2016. "Temporal Taylor’s scaling of facial electromyography and electrodermal activity in the course of emotional stimulation," Chaos, Solitons & Fractals, Elsevier, vol. 90(C), pages 91-100.
    3. Aki-Hiro Sato & Takaki Hayashi & Janusz Hołyst, 2012. "Comprehensive analysis of market conditions in the foreign exchange market," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 7(2), pages 167-179, October.
    4. Aki-Hiro Sato & Takaki Hayashi & Janusz A. Ho{l}yst, 2012. "Comprehensive Analysis of Market Conditions in the Foreign Exchange Market: Fluctuation Scaling and Variance-Covariance Matrix," Papers 1204.0426, arXiv.org.

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