This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The tick/volatility ratio as a determinant of the compass rose pattern

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Chun Lee
Ike Mathur
Kimberly Gleason
Abstract

This study provides evidence that low frequency data masks certain returns phenomena in the foreign exchange (forex) market. It is shown that the compass rose pattern is entirely absent in daily returns in the spot and futures forex markets. In contrast, the intraday returns, especially those for holding periods of less than an hour, clearly exhibit the pattern. Monte Carlo investigation of the tick/volatility ratio provides convincing evidence that the pattern appears only if the tick/volatility ratio is above some threshold level. Since intraday returns have a ratio above the threshold value, they exhibit the pattern. On the other hand, the absence of the pattern in daily returns is due to the fact that the spot and futures currency returns examined have a ratio much smaller than the threshold value. Overall, the evidence is consistent with the hypothesis that the tick/volatility ratio is a determinant of the compass rose pattern. The economic implications of this pattern are discussed.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://taylorandfrancis.metapress.com/link.asp?target=contribution&id=N6QMQ30635222666
File Format: text/html
File Function:
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Article provided by Taylor and Francis Journals in its journal The European Journal of Finance.

Volume (Year): 11 (2005)
Issue (Month): 2 (April)
Pages: 93-109
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:taf:eurjfi:v:11:y:2005:i:2:p:93-109

Contact details of provider:
Web page: http://taylorandfrancis.metapress.com/link.asp?target=journal&id=100161

Order Information:
Web: http://www.tandf.co.uk/journals/subscription.html

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Muller, Ulrich A. & Dacorogna, Michel M. & Olsen, Richard B. & Pictet, Olivier V. & Schwarz, Matthias & Morgenegg, Claude, 1990. "Statistical study of foreign exchange rates, empirical evidence of a price change scaling law, and intraday analysis," Journal of Banking & Finance, Elsevier, vol. 14(6), pages 1189-1208, December. [Downloadable!] (restricted)
  2. Wang, Huaiqing & Wang, Chen, 2002. "Visibility of the compass rose in financial asset returns: A quantitative study," Journal of Banking & Finance, Elsevier, vol. 26(6), pages 1099-1111, June. [Downloadable!] (restricted)
  3. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59. [Downloadable!] (restricted)
  4. Crack, Timothy Falcon & Ledoit, Olivier, 1996. " Robust Structure without Predictability: The "Compass Rose" Pattern of the Stock Market," Journal of Finance, American Finance Association, vol. 51(2), pages 751-62, June. [Downloadable!] (restricted)
  5. Neely, C. J. & Weller, P. A., 2003. "Intraday technical trading in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 22(2), pages 223-237, April. [Downloadable!] (restricted)
    Other versions:
  6. Harvey, Campbell R & Huang, Roger D, 1991. "Volatility in the Foreign Currency Futures Market," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 4(3), pages 543-69. [Downloadable!] (restricted)
  7. Harris, Lawrence, 1990. "Estimation of Stock Price Variances and Serial Covariances from Discrete Observations," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 25(03), pages 291-306, September. [Downloadable!]
  8. Kramer, Walter & Runde, Ralf, 1997. "Chaos and the compass rose," Economics Letters, Elsevier, vol. 54(2), pages 113-118, February. [Downloadable!] (restricted)
  9. Elyasiani, Elyas & Kocagil, Ahmet E., 2001. "Interdependence and dynamics in currency futures markets: A multivariate analysis of intraday data," Journal of Banking & Finance, Elsevier, vol. 25(6), pages 1161-1186, June. [Downloadable!] (restricted)
  10. Almeida, Alvaro & Goodhart, Charles & Payne, Richard, 1998. "The Effects of Macroeconomic News on High Frequency Exchange Rate Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(03), pages 383-408, September. [Downloadable!]
  11. Goodhart, C. A. E. & Figliuoli, L., 1991. "Every minute counts in financial markets," Journal of International Money and Finance, Elsevier, vol. 10(1), pages 23-52, March. [Downloadable!] (restricted)
  12. Caporale, Guglielmo Maria & Hassapis, Christis & Pittis, Nikitas, 1998. "Conditional Leptokurtosis and Non-Linear Dependence in Exchange Rate Returns," Journal of Policy Modeling, Elsevier, vol. 20(5), pages 581-601, October. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? Citation analysis on IDEAS includes online papers that are freely accessible and whose text could be automatically analyzed, currently about 210000 papers.

This page was last updated on 2009-11-25.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.