Antipersistent Markov behavior in foreign exchange markets

Roberto Baviera, Michele Pasquini, Maurizio Serva, Davide Vergni and Angelo Vulpiani

Physica A: Statistical Mechanics and its Applications, 2002, vol. 312, issue 3, 565-576

Abstract: A quantitative check of efficiency in US dollar/Deutsche mark exchange rates is developed using high-frequency (tick by tick) data. The antipersistent Markov behavior of log-price fluctuations of given size implies, in principle, the possibility of a statistical forecast. We introduce and measure the available information of the quote sequence, and we show how it can be profitable following a particular trading rule.

Keywords: Markov process; Exchange rate; Shannon entropy; Forecasting (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:312:y:2002:i:3:p:565-576

DOI: 10.1016/S0378-4371(02)00968-8

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