Autocorrelation as a source of truncated Lévy flights in foreign exchange rates

Annibal Figueiredo, Iram Gleria, Raul Matsushita and Sergio Da Silva

Physica A: Statistical Mechanics and its Applications, 2003, vol. 323, issue C, 601-625

Abstract: We suggest that the ultraslow speed of convergence associated with truncated Lévy flights (Phys. Rev. Lett. 73 (1994) 2946) may well be explained by autocorrelations in data. We show how a particular type of autocorrelation generates power laws consistent with a truncated Lévy flight. Stock exchanges have been suggested to be modeled by a truncated Lévy flight (Nature 376 (1995) 46; Physica A 297 (2001) 509; Econom. Bull. 7 (2002) 1). Here foreign exchange rate data are taken instead. Scaling power laws in the “probability of return to the origin” are shown to emerge for most currencies. A novel approach to measure how distant a process is from a Gaussian regime is presented.

Keywords: Truncated Lévy flights; Foreign exchange rates (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (15)

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Related works:
Working Paper: Autocorrelation as a Source of Truncated Levy Flights in Foreign Exchange Rates (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:323:y:2003:i:c:p:601-625

DOI: 10.1016/S0378-4371(03)00029-3

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