Cross-sample entropy of foreign exchange time series

Li-Zhi Liu, Xi-Yuan Qian and Heng-Yao Lu

Physica A: Statistical Mechanics and its Applications, 2010, vol. 389, issue 21, 4785-4792

Abstract: The correlation of foreign exchange rates in currency markets is investigated based on the empirical data of DKK/USD, NOK/USD, CAD/USD, JPY/USD, KRW/USD, SGD/USD, THB/USD and TWD/USD for a period from 1995 to 2002. Cross-SampEn (cross-sample entropy) method is used to compare the returns of every two exchange rate time series to assess their degree of asynchrony. The calculation method of confidence interval of SampEn is extended and applied to cross-SampEn. The cross-SampEn and its confidence interval for every two of the exchange rate time series in periods 1995–1998 (before the Asian currency crisis) and 1999–2002 (after the Asian currency crisis) are calculated. The results show that the cross-SampEn of every two of these exchange rates becomes higher after the Asian currency crisis, indicating a higher asynchrony between the exchange rates. Especially for Singapore, Thailand and Taiwan, the cross-SampEn values after the Asian currency crisis are significantly higher than those before the Asian currency crisis. Comparison with the correlation coefficient shows that cross-SampEn is superior to describe the correlation between time series.

Keywords: Cross-sample entropy (cross-SampEn); Foreign exchange rate; Time series (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:389:y:2010:i:21:p:4785-4792

DOI: 10.1016/j.physa.2010.06.013

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