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Multi-Fractality in Foreign Currency Markets

In: Economic Uncertainty, Instabilities And Asset Bubbles Selected Essays

Author

Listed:
  • Marco Corazza

    (University Ca' Foscari of Venice, Italy)

  • A. G. Malliaris

    (Loyola University Chicago, U.S.A.)

Abstract

Several empirical studies have shown the inadequacy of the standard Brownian motion (sBm) as a model of asset returns. To correct for this evidence some authors have conjectured that asset returns may be independently and identically Pareto-Lévy stable (PLs) distributed, whereas others have asserted that asset returns may be identically - but not independently – fractional Brownian motion (fBm) distributed with Hurst exponents, in both cases, that differ from 0.5. In this article we empirically explore such non-standard assumptions for both spot and (nearby) futures returns for five foreign currencies: the British Pound, the Canadian Dollar, the German Mark, the Swiss Franc, and the Japanese Yen.

Suggested Citation

  • Marco Corazza & A. G. Malliaris, 2005. "Multi-Fractality in Foreign Currency Markets," World Scientific Book Chapters, in: Economic Uncertainty, Instabilities And Asset Bubbles Selected Essays, chapter 11, pages 151-184, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812701015_0011
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    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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