This paper focuses on testing the long memory in exchange rates series of 18 emerging and 10 developed foreign exchange markets against the USD, along with explaining the behavior of these markets by ...the implications of the adaptive market hypothesis. Our empirical approach is based on DFA methodology for computing Hurst exponent (a parameter for capturing long memory) along with the established bootstrapping procedure for improving the results obtained. We also analyzed the impact of the great financial crisis (2007–09) on the efficiency of these foreign exchange markets by dividing our sample period into three sub-periods; pre, during, and post-financial crisis. Finally, the rolling window approach is applied for capturing the time-varying dimension of market efficiency. All the aforementioned tests confirmed that the emerging and developed foreign exchange markets exhibit episodes of long memory (persistence long memory/anti-persistent long memory) and no long memory signaling their efficiency has been affected by the financial crisis due to the changes in the behavior of market participants, and they follow a time-varying market efficiency. Our results confirmed that the behavior of these markets is consistent with the implications of the Adaptive Market Hypothesis.
•We study static and time varying market efficiency of main currency pairs.•We use the DFA Hurst exponent to capture long memory behavior in the returns series.•We also examine effects of financial crisis-2008 on long memory characteristic.•The episodes of long memory show time varying efficiency for the studied markets.•Overall the behavior of the markets is in line with implications of the adaptive market hypothesis.
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The article discusses the key trends in the development of the Russian foreign exchange market in 2022 – dedollarization, decentralization, and delocalization. The authors analyze the structure of ...foreign exchange transactions, pointing to its change, which occurred under the influence of extreme factors, which include sanctions against the Russian Federation in general and financial market participants in particular. The analysis is confirmed by statistical data on transactions in the foreign exchange market. Proposals were made for the development of regulation in order to further stimulate foreign exchange transactions and settlements with friendly countries.
This study incorporates the spans of sequences of continuous trades and reversal trades to investigate whether the currency liquidity is varying with the span of continuous trades or reversal trades. ...We highlight the dependency between the span of continuous trades and the realized bid‐ask spread to explain the currency liquidity dynamics using high‐frequency foreign exchange data. Our findings show that the spans of continuous trades play an important role in determining the market liquidity because a larger span of a continuous sequence puts a drain on the market liquidity and thereby consumes the funding liquidity, eventually increasing the bid‐ask spread.
Abstract
After abandoning Bretton Wood, the foreign exchange market has been dominated by three types of economies: export‐oriented economies (China and other Asian countries), commodity economies ...(Australia, New Zealand, Canada, and oil exporting nations) and reserve‐currency economies (US, EU, UK, and Swiss). As a result, the asymmetric development of the foreign exchange market has reduced the monetary and fiscal space for PSIDS, which face structural challenges such as a low population base, import dependence, aid dependency, climate risk, and political uncertainty. The ‘Exchange Market Pressure Index’ (EMPI) for Fiji is developed in this article to quantify the pressure on the exchange rate and monetary authorities' responses to micromanaging balance sheet impacts. The calculated EMPI accurately reflects four instances of financial distress in Fiji, including significant exchange market pressure in response to growing trade deficits and external debt, the global financial crisis's contagion effect, and political uncertainty. Our EMP Index's robustness is attributed in part to the employment of a dynamic time series estimate method, a time‐varying weighing scheme, and a high‐frequency monthly dataset.
The main objective of this study is to examine the existence and nature of the relationship between the exchange rate and foreign exchange reserves. To avoid influencing foreign exchange market ...expectations, the intervention program should indicate in advance the nature, frequency, and size of the central bank's foreign exchange transactions. Thus, in this sense, it is essential to determine the nature of the relationship between the exchange rate and the interventions made from and for the official foreign exchange reserve. Following the realization of this study, it was highlighted the conclusion that through the application of Johansen cointegration tests, between the pairs of variables - NEER and the interventions from/for the foreign exchange reserve; official exchange rate and interventions in/for the foreign exchange reserve - there is at least one cointegration relationship. That is, between the exchange rate and the interventions in/for the foreign exchange reserve, a long-term relationship is highlighted, which can facilitate the forecast.
•Tail dependence structure of the FX market is studied from a perspective of network.•A concept of lower- and upper-tail dependence networks is proposed.•The networks are built by combining the SJC ...copula with the MST and PMFG.•Some notable differences between the two tail dependence networks are found.•3-cliques, 4-cliques and communities are detected in the two tail dependence PMFGs.
Tail dependence of financial entities describes when the price of one financial asset has an extreme fluctuation (e.g., price sharply rises or falls), the degree of its effect on the price fluctuation of another asset. Under the background of the global financial crisis, tail dependence structure of financial entities plays an important role in financial risk management, portfolio selection, and asset pricing. In this paper, we propose a concept of tail dependence networks to investigate the tail dependence structure of the foreign exchange (FX) market. Lower- and upper-tail dependence networks for 42 major currencies in the FX market from 2005 to 2012 are constructed by combing the symmetrized Joe-Clayton copula model and two filtered graph algorithms, i.e., the minimum spanning tree (MST) and the planar maximally filtered graph (PMFG). We also construct the tail dependence hierarchical trees (HTs) associated with the MSTs to analyze the currency clusters. We find that (1) the two series of lower- and upper-tail dependence coefficients present different statistical properties; (2) the upper-tail dependence networks are tighter than the lower-tail dependence networks; and (3) different currency clusters, cliques and communities are respectively found in the two tail dependence networks. The key empirical results indicate that market participants should consider the different topological features at different market situations (e.g., a booming market or a recession market) to make decisions on the investing or hedging strategies. Overall, our obtained results based on the tail dependence networks are new insights in financial management and supply a novel analytical tool for market participants.
This paper studies the effects of U.S. unconventional monetary policy announcements on the implied volatility of three major currency pairs, Dollar/Euro, Dollar/British Pound and Dollar/Yen by using ...panel data analysis along with several model specifications and robustness tests. Monetary policy announcements not only have an effect on the realized behavior of asset prices, but also influence market participants' expectations regarding future volatility. Our empirical findings show that Federal Reserve's unconventional monetary policy announcements significantly reduce the market expectations about future realized volatility of exchange rates, suggesting that lax monetary policy leads to elevated risk-tolerance in currency markets. Furthermore, our findings indicate that market participants' expectations respond differently to the different rounds of U.S. quantitative easing.
We carry out a detailed large-scale data analysis of price response functions in the spot foreign exchange market for different years and different time scales. Such response functions provide ...quantitative information on the deviation from Markovian behavior. The price response functions show an increase to a maximum followed by a slow decrease as the time lag grows, in trade time scale and in physical time scale, for all analyzed years. Furthermore, we use a price increment point (pip) bid–ask spread definition to group different foreign exchange pairs and analyze the impact of the bid–ask spread in the price response functions. We find that large pip bid–ask spreads have a stronger impact on the response. This is similar to what has been found in stock markets.
•Large-scale data analysis of the spot foreign exchange market.•Analysis of price response functions for different years and time scales.•Price functions show an increase to a maximum followed by a slow decrease.•Analysis of the bid–ask spread impact in the price response functions.•All the results are similar to what has been found in stock markets.
Association rules forecasting for the foreign exchange market EL Mahjouby, Mohamed; Bennani, Mohamed Taj; Lamrini, Mohamed ...
International journal of electrical and computer engineering (Malacca, Malacca),
06/2024, Letnik:
14, Številka:
3
Journal Article
Odprti dostop
Several association rule mining algorithms exist, and among them, Apriori is one of the most commonly used methods for extracting frequent item sets from vast databases and generating association ...rules to gain insights. In this research, we have applied a data mining technique to implement association rules and explore frequent item sets. Our study introduced a model that employs association rules to uncover associations between the foreign exchange market, the gold commodity, and the National Association of Securities Dealers automated quotations (NASDAQ). We suggested a method that used data mining to identify the good points of buying and selling in the foreign exchange market by utilizing technical indicators such as moving average convergence divergence (MACD) and the stochastic indicator to create association rules. The experimental findings indicate that the proposed model successfully generates strong association rules.
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