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Multi-Fractality in Foreign Currency Markets

In: Economic Uncertainty, Instabilities And Asset Bubbles Selected Essays

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  • Marco Corazza

    (University Ca' Foscari of Venice, Italy)

  • A. G. Malliaris

    (Loyola University Chicago, U.S.A.)

Abstract

Several empirical studies have shown the inadequacy of the standard Brownian motion (sBm) as a model of asset returns. To correct for this evidence some authors have conjectured that asset returns may be independently and identically Pareto-Lévy stable (PLs) distributed, whereas others have asserted that asset returns may be identically - but not independently – fractional Brownian motion (fBm) distributed with Hurst exponents, in both cases, that differ from 0.5. In this article we empirically explore such non-standard assumptions for both spot and (nearby) futures returns for five foreign currencies: the British Pound, the Canadian Dollar, the German Mark, the Swiss Franc, and the Japanese Yen.

Suggested Citation

  • Marco Corazza & A. G. Malliaris, 2005. "Multi-Fractality in Foreign Currency Markets," World Scientific Book Chapters, in: Economic Uncertainty, Instabilities And Asset Bubbles Selected Essays, chapter 11, pages 151-184, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812701015_0011
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    4. Karuppiah, Jeyanthi & Los, Cornelis A., 2005. "Wavelet multiresolution analysis of high-frequency Asian FX rates, Summer 1997," International Review of Financial Analysis, Elsevier, vol. 14(2), pages 211-246.
    5. Truong Ngoc Cuong & Le Ngoc Bao Long & Hwan-Seong Kim & Sam-Sang You, 2023. "Data analytics and throughput forecasting in port management systems against disruptions: a case study of Busan Port," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 25(1), pages 61-89, March.
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    7. Bo Qian & Khaled Rasheed, 2010. "Foreign exchange market prediction with multiple classifiers," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(3), pages 271-284.
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    9. Withanawasam, R.M. & Whigham, P.A. & Crack, Timothy Falcon, 2013. "Characterizing limit order prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(21), pages 5346-5355.
    10. Sutthisit Jamdee & Cornelis A. Los, 2005. "Multifractal Modeling of the US Treasury Term Structure and Fed Funds Rate," Finance 0502021, University Library of Munich, Germany.
    11. Cornelis A. Los & Rossitsa M. Yalamova, 2004. "Multi-Fractal Spectral Analysis of the 1987 Stock Market Crash," Finance 0409050, University Library of Munich, Germany.
    12. Truong Ngoc Cuong & Sam-Sang You & Le Ngoc Bao Long & Hwan-Seong Kim, 2022. "Seaport Resilience Analysis and Throughput Forecast Using a Deep Learning Approach: A Case Study of Busan Port," Sustainability, MDPI, vol. 14(21), pages 1-25, October.
    13. Rossitsa Yalamova, 2012. "Fractal Measures in Market Microstructure Research," Multinational Finance Journal, Multinational Finance Journal, vol. 16(1-2), pages 137-154, March - J.
    14. Cerqueti, Roy & Fanelli, Viviana & Rotundo, Giulia, 2019. "Long run analysis of crude oil portfolios," Energy Economics, Elsevier, vol. 79(C), pages 183-205.
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    17. Kyrtsou, Catherine & Malliaris, Anastasios G., 2009. "The impact of information signals on market prices when agents have non-linear trading rules," Economic Modelling, Elsevier, vol. 26(1), pages 167-176, January.
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    19. Roy Cerqueti & Viviana Fanelli, 2021. "Long memory and crude oil’s price predictability," Annals of Operations Research, Springer, vol. 299(1), pages 895-906, April.
    20. Luigi Buzzacchi & Luca Ghezzi, 2023. "Mean Reversion Lessens Mean Blur: Evidence from the S&P Composite Index," IJFS, MDPI, vol. 11(1), pages 1-13, January.
    21. Samit Paul, 2020. "Time Varying Efficiency in Indian Sectors: An Event Study on Demonetization," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 18(1), pages 103-127, March.
    22. Claudeci Da Silva & Hugo Agudelo Murillo & Joaquim Miguel Couto, 2014. "Early Warning Systems: Análise De Ummodelo Probit De Contágio De Crise Dos Estados Unidos Para O Brasil(2000-2010)," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 110, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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    More about this item

    Keywords

    Asymptotic Economic Growth; Inflation; Interest Rates; Asset Pricing; Equity Markets; Foreign Currency; Monetary Policy; Crash;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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