A directional-change event approach for studying financial time series
Abstract
Financial markets witness high levels of activity at certain times but remain calm at others. This makes the flow of physical time discontinuous. Therefore, to use physical time scales for studying financial time series runs the risk of missing important activities. An alternative approach is to use an event-based time scale that captures periodic activities in the market. In this paper, the authors use a special type of event, called a directional-change event, and show its usefulness in capturing periodic market activities. The study confirms that the length of the price-curve coastline, as defined by directional-change events, turns out to be a long one. --Download Info
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Article provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.
Volume (Year): 6 (2012)
Issue (Month): 36 ()
Pages: 1-17
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Related research
Keywords: directional-change event; intrinsic time; high-frequency finance; foreign exchange market; time-series analysis;Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
References
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- J. B. Glattfelder & A. Dupuis & R. B. Olsen, 2008.
"Patterns in high-frequency FX data: Discovery of 12 empirical scaling laws,"
Papers
0809.1040, arXiv.org, revised Jun 2010.
- J. B. Glattfelder & A. Dupuis & R. B. Olsen, 2010. "Patterns in high-frequency FX data: discovery of 12 empirical scaling laws," Quantitative Finance, Taylor and Francis Journals, vol. 11(4), pages 599-614.
- T. Bisig & A. Dupuis & V. Impagliazzo & R. B. Olsen, 2012. "The scale of market quakes," Quantitative Finance, Taylor and Francis Journals, vol. 12(4), pages 501-508, July.
- Allais, Maurice, 1974. "The Psychological Rate of Interest," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(3), pages 285-331, August.
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