Application of nonlinear time series analysis techniques to high-frequency currency exchange data

Fernanda Strozzi, José-Manuel Zaldı́var and Joseph P Zbilut

Physica A: Statistical Mechanics and its Applications, 2002, vol. 312, issue 3, 520-538

Abstract: In this work we have applied nonlinear time series analysis to high-frequency currency exchange data. The time series studied are the exchange rates between the US Dollar and 18 other foreign currencies from within and without the Euro zone. Our goal was to determine if their dynamical behaviours were in some way correlated. The nonexistence of stationarity called for the application of recurrence quantification analysis as a tool for this analysis, and is based on the definition of several parameters that allow for the quantification of recurrence plots. The method was checked using the European Monetary System currency exchanges. The results show, as expected, the high correlation between the currencies that are part of the Euro, but also a strong correlation between the Japanese Yen, the Canadian Dollar and the British Pound. Singularities of the series are also demonstrated taking into account historical events, in 1996, in the Euro zone.

Keywords: Econophysics; Recurrence quantification; Nonlinear dynamics; Exchange rates (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (28)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:312:y:2002:i:3:p:520-538

DOI: 10.1016/S0378-4371(02)00846-4

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