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Are foreign currency markets interdependent? evidence from data mining technologies

  • Malliaris, A.G.
  • Malliaris, Mary

This study uses two data mining methodologies: Classification and Regression Trees (C&RT) and Generalized Rule Induction (GRI) to uncover patterns among daily cash closing prices of eight currency markets. Data from 2000 through 2009 is used, with the last year held out to test the robustness of the rules found in the previous nine years. Results from the two methodologies are contrasted. A number of rules which perform well in both the training and testing years are discussed as empirical evidence of interdependence among foreign currency markets. The mechanical rules identified in this paper can usefully supplement other types of financial modeling of foreign currencies.

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File URL: http://mpra.ub.uni-muenchen.de/35261/1/MPRA_paper_35261.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35261.

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Date of creation: 28 Nov 2011
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Handle: RePEc:pra:mprapa:35261
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  1. Gian-Maria Milesi-Ferretti & Philip R. Lane, 1999. "The External Wealth of Nations: Measures of Foreign Assets and Liabilities for Industrial and Developing Countries," IMF Working Papers 99/115, International Monetary Fund.
  2. Menkhoff, Lukas & Sarno, Lucio & Schmeling, Maik & Schrimpf, Andreas, 2012. "Currency momentum strategies," Journal of Financial Economics, Elsevier, vol. 106(3), pages 660-684.
  3. John Y. Campbell & Karine Serfaty-de Medeiros & Luis M. Viceira, 2007. "Global Currency Hedging," NBER Working Papers 13088, National Bureau of Economic Research, Inc.
  4. Tim A. Kroencke & Felix Schindler & Andreas Schrimpf, 2011. "International Diversification Benefits with Foreign Exchange Investment Styles," CREATES Research Papers 2011-10, School of Economics and Management, University of Aarhus.
  5. Jordà, Òscar & Taylor, Alan M., 2012. "The carry trade and fundamentals: Nothing to fear but FEER itself," Journal of International Economics, Elsevier, vol. 88(1), pages 74-90.
  6. Niall Coffey & Warren B. Hrung & Asani Sarkar, 2009. "Capital constraints, counterparty risk, and deviations from covered interest rate parity," Staff Reports 393, Federal Reserve Bank of New York.
  7. David J. Hand & Heikki Mannila & Padhraic Smyth, 2001. "Principles of Data Mining," MIT Press Books, The MIT Press, edition 1, volume 1, number 026208290x, June.
  8. Nikkinen, Jussi & Sahlstrom, Petri & Vahamaa, Sami, 2006. "Implied volatility linkages among major European currencies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(2), pages 87-103, April.
  9. Roy Batchelor & George Albanis, 2002. "Combining Heterogeneous Classifiers for Stock Selection," Working Papers wp02-01, Warwick Business School, Finance Group.
  10. Orlov, Alexei G., 2009. "A cospectral analysis of exchange rate comovements during Asian financial crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(5), pages 742-758, December.
  11. 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.
  12. Jochen M. Schmittmann, 2010. "Currency Hedging for International Portfolios," IMF Working Papers 10/151, International Monetary Fund.
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