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Wavelet Multiresolution Analysis of High-Frequency FX Rates, Summer 1997

  • Jeyanthi Karuppiah

    (Nanyang Business School, Nanyang Technological University, Singapore)

  • Cornelis A. Los

    (School of Economics, University of Adelaide)

FX pricing processes are nonstationary and their frequency characteristics are time-dependent. Most do not conform to geometric Brownian motion, since they exhibit a scaling law with a Hurst exponent between zero and 0.5 and fractal dimensions between 1.5 and 2. This paper uses wavelet multiresolution analysis, with Haar wavelets, to analyze the nonstationarity (time-dependence) and self-similarity (scale-dependence) of intra-day Asian currency spot exchange rates.

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File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2000-06.pdf
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Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2000-06.

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Length: 58 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:adl:wpaper:2000-06
Contact details of provider: Postal: Adelaide SA 5005
Phone: (618) 8303 5540
Web page: http://www.economics.adelaide.edu.au/

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  4. Baillie, Richard T & Bollerslev, Tim, 1991. "Intra-day and Inter-market Volatility in Foreign Exchange Rates," Review of Economic Studies, Wiley Blackwell, vol. 58(3), pages 565-85, May.
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  9. Cornelis A. Los, 2004. "Nonparametric Testing of the High-Frequency Efficiency of the 1997 Asian Foreign Exchange Markets," Finance 0409040, EconWPA.
  10. Robert F. Engle & Takatoshi Ito & Wen-Ling Lin, 1988. "Meteor Showers or Heat Waves? Heteroskedastic Intra-Daily Volatility in the Foreign Exchange Market," NBER Working Papers 2609, National Bureau of Economic Research, Inc.
  11. Bollerslev, Tim & Domowitz, Ian, 1993. " Trading Patterns and Prices in the Interbank Foreign Exchange Market," Journal of Finance, American Finance Association, vol. 48(4), pages 1421-43, September.
  12. Ramsey James B. & Lampart Camille, 1998. "The Decomposition of Economic Relationships by Time Scale Using Wavelets: Expenditure and Income," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 3(1), pages 1-22, April.
  13. 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.
  14. Cornelis A. Los, 2004. "Nonparametric Efficiency Testing of Asian Stock Markets Using Weekly Data," Finance 0409033, EconWPA.
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  17. Ashley, Richard A & Patterson, Douglas M, 1989. "Linear versus Nonlinear Macroeconomies: A Statistical Test," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(3), pages 685-704, August.
  18. Attanasio, Orazio P, 1991. "Risk, Time-Varying Second Moments and Market Efficiency," Review of Economic Studies, Wiley Blackwell, vol. 58(3), pages 479-94, May.
  19. Richard A. Meese & Andrew K. Rose, 1989. "An empirical assessment of non-linearities in models of exchange rate determination," International Finance Discussion Papers 367, Board of Governors of the Federal Reserve System (U.S.).
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  21. Hsieh, David A, 1989. "Modeling Heteroscedasticity in Daily Foreign-Exchange Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(3), pages 307-17, July.
  22. Philippe Jorion, 1988. "On Jump Processes in the Foreign Exchange and Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 427-445.
  23. 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.
  24. Batten, Jonathan & Ellis, Craig & Mellor, Robert, 1999. "Scaling laws in variance as a measure of long-term dependence," International Review of Financial Analysis, Elsevier, vol. 8(2), pages 123-138, June.
  25. Engle, Robert F. & Russell, Jeffrey R., 1997. "Forecasting the frequency of changes in quoted foreign exchange prices with the autoregressive conditional duration model," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 187-212, June.
  26. Bessembinder, Hendrik, 1994. "Bid-ask spreads in the interbank foreign exchange markets," Journal of Financial Economics, Elsevier, vol. 35(3), pages 317-348, June.
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