Scaling and correlations in foreign exchange market

J. Jiang, K. Ma and X. Cai

Physica A: Statistical Mechanics and its Applications, 2007, vol. 375, issue 1, 274-280

Abstract: We observe that the distribution of the relative return, describing the variation of a certain currency, of 74 global currencies obeys a power-law. By using the random matrix theory we find that the distribution of eigenvalues of correlation matrix of relative return also follows a power-law. Using a scaled factorial moment we investigate the distribution of correlation coefficients of the relative return and observe intermittence phenomenon. Furthermore, we define the influence strength for a certain currency, which reflects the influence of its price change to the community interested. By doing that, we find that the distribution of influence strength is again a power-law. Beyond that, we compare the influence strength of Chinese Yuan (RMB) to those of other seven important currencies, which may have some interesting indications.

Keywords: Relative return; Correlations; Scaled factorial moment; Influence strength (search for similar items in EconPapers)
Date: 2007
References: View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:375:y:2007:i:1:p:274-280

DOI: 10.1016/j.physa.2006.08.073

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