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Measuring the Complexity of Currency Markets by Fractal Dimension Analysis

Author

Listed:
  • Abdol S. Soofi

    (University of Wisconsin-Platteville, Department of Economics, Platteville WI 53818, USA)

  • Andreas Galka

    (Institute of Experimental and Applied Physics, University of Kiel, Germany;
    Institute of Statistical Mathematics, Department of Prediction and Control, Tokyo, Minato-ku, Minami-Azabu 4-6-7, Japan)

Abstract

We use the theory of nonlinear dynamical systems to measure the complexity of currency markets by estimating the correlation dimension of the returns of the Dollar/Pound and Dollar/Yen daily exchange rates (the spot rates). We test the significance of the results by comparing them to correlation dimension estimates for surrogate time series, i.e. stochastic linear time series with the same power spectrum and amplitude distribution as given by the original data. We find discernible nonlinear structure in the returns of the Dollar/Pound daily rate.

Suggested Citation

  • Abdol S. Soofi & Andreas Galka, 2003. "Measuring the Complexity of Currency Markets by Fractal Dimension Analysis," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 6(06), pages 553-563.
    • Handle: RePEc:wsi:ijtafx:v:06:y:2003:i:06:n:s0219024903001955
    DOI: 10.1142/S0219024903001955
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    Citations

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    Cited by:

    1. Abdol S. Soofi & Zhe Li & Xiaofeng Hui, 2012. "Nonlinear interdependence of the Chinese stock markets," Quantitative Finance, Taylor & Francis Journals, vol. 12(3), pages 397-410, November.
    2. Lai, Lin & Guo, Kun, 2017. "The performance of one belt and one road exchange rate: Based on improved singular spectrum analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 483(C), pages 299-308.
    3. Nie, Chun-Xiao, 2017. "Correlation dimension of financial market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 473(C), pages 632-639.
    4. Soofi Abdol S, 2008. "Global Financial Integration and the MENA Countries: Evidence from Equity and Money Markets," Review of Middle East Economics and Finance, De Gruyter, vol. 4(2), pages 93-116, April.
    5. Nie, Chun-Xiao, 2019. "Applying correlation dimension to the analysis of the evolution of network structure," Chaos, Solitons & Fractals, Elsevier, vol. 123(C), pages 294-303.

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