Fractal market hypothesis: evidence for nine Asian forex markets

Anoop S Kumar, Chaithanya Jayakumar () and Bandi Kamaiah
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Chaithanya Jayakumar: SMVD University
Bandi Kamaiah: SMVD University

Indian Economic Review, 2017, vol. 52, issue 1, No 9, 192 pages

Abstract: Abstract In this study , an attempt is made to test the Fractal Markets Hypothesis (FMH) which states that a financial market can plunge into crisis when a particular trading time horizon gains prominence over others. We apply a wavelet-based method to capture the activities in different timescales. We test the proposition for nine Asian forex markets of China, India, Hongkong, Japan, South Korea, Singapore, Sri Lanka, Taiwan, and Thailand for the period from 05-01-1994 to 30-06-2017. We use bilateral daily exchange rate of the corresponding currencies against the US Dollar. The time period covers two major crises and they are the 1997–1998 East Asian currency crisis and the 2008 global financial crisis. The study captures both the events, and from the wavelet spectra, it is evident that the crisis period distinguishes itself with increased activity by the short-term traders as proposed by the FMH. It is also found that the 1997–1998 crises affected not only the East Asian markets, but also the other forex markets as well.

Keywords: Market efficiency; Wavelets; Asian forex markets; Fractal market hypothesis (search for similar items in EconPapers)
JEL-codes: F31 G01 G14 G15 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s41775-017-0014-7

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