Detecting intraday periodicities with application to high frequency exchange rates

Chris Brooks and Melvin Hinich

Journal of the Royal Statistical Society Series C, 2006, vol. 55, issue 2, 241-259

Abstract: Summary. Many recent papers have documented periodicities in returns, return volatility, bid–ask spreads and trading volume, in both equity and foreign exchange markets. We propose and employ a new test for detecting subtle periodicities in time series data based on a signal coherence function. The technique is applied to a set of seven half‐hourly exchange rate series. Overall, we find the signal coherence to be maximal at the 8‐h and 12‐h frequencies. Retaining only the most coherent frequencies for each series, we implement a trading rule that is based on these observed periodicities. Our results demonstrate in all cases except one that, in gross terms, the rules can generate returns that are considerably greater than those of a buy‐and‐hold strategy, although they cannot retain their profitability net of transactions costs. We conjecture that this methodology could constitute an important tool for financial market researchers which will enable them to detect, quantify and rank the various periodic components in financial data better.

Date: 2006
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.1111/j.1467-9876.2006.00534.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jorssc:v:55:y:2006:i:2:p:241-259

Ordering information: This journal article can be ordered from
http://ordering.onli ... 1111/(ISSN)1467-9876

Access Statistics for this article

Journal of the Royal Statistical Society Series C is currently edited by R. Chandler and P. W. F. Smith

More articles in Journal of the Royal Statistical Society Series C from Royal Statistical Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().