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Fractal market hypothesis: evidence for nine Asian forex markets

Author

Listed:
  • Anoop S. Kumar

    (BITS Pilani K.K Birla Campus)

  • Chaithanya Jayakumar

    (SMVD University)

  • Bandi Kamaiah

    (SMVD University)

Abstract

In this study , an attempt is made to test the Fractal Markets Hypothesis (FMH) which states that a financial market can plunge into crisis when a particular trading time horizon gains prominence over others. We apply a wavelet-based method to capture the activities in different timescales. We test the proposition for nine Asian forex markets of China, India, Hongkong, Japan, South Korea, Singapore, Sri Lanka, Taiwan, and Thailand for the period from 05-01-1994 to 30-06-2017. We use bilateral daily exchange rate of the corresponding currencies against the US Dollar. The time period covers two major crises and they are the 1997–1998 East Asian currency crisis and the 2008 global financial crisis. The study captures both the events, and from the wavelet spectra, it is evident that the crisis period distinguishes itself with increased activity by the short-term traders as proposed by the FMH. It is also found that the 1997–1998 crises affected not only the East Asian markets, but also the other forex markets as well.

Suggested Citation

  • Anoop S. Kumar & Chaithanya Jayakumar & Bandi Kamaiah, 2017. "Fractal market hypothesis: evidence for nine Asian forex markets," Indian Economic Review, Springer, vol. 52(1), pages 181-192, December.
    • Handle: RePEc:spr:inecre:v:52:y:2017:i:1:d:10.1007_s41775-017-0014-7
    DOI: 10.1007/s41775-017-0014-7
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    References listed on IDEAS

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    4. Ahmad, Rubi & Rhee, S. Ghon & Wong, Yuen Meng, 2012. "Foreign exchange market efficiency under recent crises: Asia-Pacific focus," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1574-1592.
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    Cited by:

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    2. Emrah BALKAN & Umut UYAR, 2022. "The Fractal Structure of CDS Spreads: Evidence from the OECD Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 106-121, April.

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    More about this item

    Keywords

    Market efficiency; Wavelets; Asian forex markets; Fractal market hypothesis;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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