Autocorrelation as a source of truncated Lévy flights in foreign exchange rates
AbstractWe suggest that the ultraslow speed of convergence associated with truncated Lévy flights (Phys. Rev. Lett. 73 (1994) 2946) may well be explained by autocorrelations in data. We show how a particular type of autocorrelation generates power laws consistent with a truncated Lévy flight. Stock exchanges have been suggested to be modeled by a truncated Lévy flight (Nature 376 (1995) 46; Physica A 297 (2001) 509; Econom. Bull. 7 (2002) 1). Here foreign exchange rate data are taken instead. Scaling power laws in the “probability of return to the origin” are shown to emerge for most currencies. A novel approach to measure how distant a process is from a Gaussian regime is presented.
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Bibliographic InfoArticle provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.
Volume (Year): 323 (2003)
Issue (Month): C ()
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Truncated Lévy flights; Foreign exchange rates;
Other versions of this item:
- Sergio Da Silva, 2004. "Autocorrelation as a Source of Truncated Levy Flights in Foreign Exchange Rates," Finance 0405018, EconWPA.
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- Sergio Da Silva & Raul Matsushita & Iram Gleria, 2002. "Scaling power laws in the Sao Paulo Stock Exchange," Economics Bulletin, AccessEcon, vol. 7(3), pages 1-12.
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Physica A: Statistical Mechanics and its Applications,
Elsevier, vol. 333(C), pages 353-369.
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- Gleria, Iram & Figueiredo, Annibal & Matsushita, Raul & Rathie, Pushpa & Da Silva, Sergio, 2004. "Exponentially damped Lévy flights, multiscaling and slow convergence in stockmarkets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 342(1), pages 200-206.
- Sergio Da Silva, 2004. "International Finance, Levy Distributions, and the Econophysics of Exchange Rates," International Finance 0405018, EconWPA.
- Sergio Da Silva, 2004. "Autocorrelation and the Sum of Stochastic Variables," Finance 0405020, EconWPA.
- da Silva, Roberto & Zembrzuski, Marcelo & Correa, Fabio C. & Lamb, Luis C., 2010. "Stock markets and criticality in the current economic crisis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(23), pages 5460-5467.
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