Inverse statistics in the foreign exchange market

M.h Jensen, A Johansen, Filippo Petroni () and I Simonsen

Physica A: Statistical Mechanics and its Applications, 2004, vol. 340, issue 4, 678-684

Abstract: We investigate intra-day foreign exchange (FX) time series using the inverse statistic analysis developed by Simonsen et al. (Eur. Phys. J. 27 (2002) 583) and Jensen et al. (Physica A 324 (2003) 338). Specifically, we study the time-averaged distributions of waiting times needed to obtain a certain increase (decrease) ρ in the price of an investment. The analysis is performed for the Deutsch Mark (DM) against the US$ for the full year of 1998, but similar results are obtained for the Japanese Yen against the US$. With high statistical significance, the presence of “resonance peaks” in the waiting time distributions is established. Such peaks are a consequence of the trading habits of the market participants as they are not present in the corresponding tick (business) waiting time distributions. Furthermore, a new stylized fact, is observed for the (normalized) waiting time distribution in the form of a power law Pdf. This result is achieved by rescaling of the physical waiting time by the corresponding tick time thereby partially removing scale-dependent features of the market activity.

Keywords: Inverse statistics; Econophysics; Interdisciplinary physics (search for similar items in EconPapers)
Date: 2004
References: View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:340:y:2004:i:4:p:678-684

DOI: 10.1016/j.physa.2004.05.024

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