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General and specific statistical properties of foreign exchange markets during a financial crash

Author

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  • Li, Wei-Shen
  • Tsai, Yun-Jie
  • Shen, Yu-Hsien
  • Liaw, Sy-Sang

Abstract

We investigate minute-by-minute foreign exchange rate (FX) data of 14 currencies with different exchange-rate regimes during a financial crash, and divide these data into several stages according to their respective tendencies: depreciation stage (stage 1), fluctuating stage (stage 2), and appreciation stage (stage 3). The tail distribution of FX rate returns satisfies a power-law structure for different types of currencies. We find the absolute value of the power-law exponent is smaller in emerging markets than in developed markets, especially during the stage 1, and is greatest in pegged currencies.

Suggested Citation

  • Li, Wei-Shen & Tsai, Yun-Jie & Shen, Yu-Hsien & Liaw, Sy-Sang, 2016. "General and specific statistical properties of foreign exchange markets during a financial crash," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 451(C), pages 601-622.
    • Handle: RePEc:eee:phsmap:v:451:y:2016:i:c:p:601-622
    DOI: 10.1016/j.physa.2016.01.077
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    Cited by:

    1. Garcin, Matthieu, 2017. "Estimation of time-dependent Hurst exponents with variational smoothing and application to forecasting foreign exchange rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 483(C), pages 462-479.

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