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Are Pound and Euro the Same Currency? - Updated

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  • Matsushita, Raul
  • Gleria, Iram
  • Figueiredo, Annibal
  • Da Silva, Sergio

Abstract

Based on long range dependence, some analysts claim that the exchange rate time series of the pound sterling and of an artificially extended euro have been locked together for years despite daily changes [1, 9]. They conclude that pound and euro are in practice the same currency. We assess the long range dependence over time through Hurst exponents of pound-dollar and extended euro-dollar exchange rates employing three alternative techniques, namely rescaled range analysis, detrended fluctuation analysis, and detrended moving average. We find the result above (which is based on detrended fluctuation analysis) not to be robust to the changing techniques and parameterizing.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1981.

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Date of creation: 2007
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Handle: RePEc:pra:mprapa:1981

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Keywords: False euro; exchange rates; financial efficiency; Hurst exponent; R/S analysis; detrended fluctuation analysis; detrending moving average;

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  1. Ausloos, M & Ivanova, K, 2000. "Introducing False EUR and False EUR exchange rates," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 286(1), pages 353-366.
  2. Andrew W. Lo, 1989. "Long-term Memory in Stock Market Prices," NBER Working Papers 2984, National Bureau of Economic Research, Inc.
  3. Carbone, A. & Castelli, G. & Stanley, H.E., 2004. "Time-dependent Hurst exponent in financial time series," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 344(1), pages 267-271.
  4. Couillard, Michel & Davison, Matt, 2005. "A comment on measuring the Hurst exponent of financial time series," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 348(C), pages 404-418.
  5. K. Ivanova & M. Ausloos, 2001. "False EUR exchange rates vs. DKK, CHF, JPY and USD. What is a strong currency?," Papers cond-mat/0103033, arXiv.org.
  6. Cajueiro, Daniel O & Tabak, Benjamin M, 2004. "The Hurst exponent over time: testing the assertion that emerging markets are becoming more efficient," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 336(3), pages 521-537.
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Cited by:
  1. Ruan, Yong-Ping & Zhou, Wei-Xing, 2011. "Long-term correlations and multifractal nature in the intertrade durations of a liquid Chinese stock and its warrant," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 390(9), pages 1646-1654.
  2. Xie, Wen-Jie & Jiang, Zhi-Qiang & Zhou, Wei-Xing, 2014. "Extreme value statistics and recurrence intervals of NYMEX energy futures volatility," Economic Modelling, Elsevier, Elsevier, vol. 36(C), pages 8-17.
  3. Zhi-Qiang Jiang & Wen-Jie Xie & Wei-Xing Zhou, 2012. "Testing the weak-form efficiency of the WTI crude oil futures market," Papers 1211.4686, arXiv.org.
  4. Wen-Jie Xie & Zhi-Qiang Jiang & Wei-Xing Zhou, 2012. "Extreme value statistics and recurrence intervals of NYMEX energy futures volatility," Papers 1211.5502, arXiv.org.

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