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Periodicities of Foreign Exchange Markets and the Directional Change Power Law

Giampaoli, Iacopo and Ng, Wing Lon and Constantinou, Nick (2013) 'Periodicities of Foreign Exchange Markets and the Directional Change Power Law.' Intelligent Systems in Accounting, Finance and Management, 20 (3). pp. 189-206. ISSN 1099-1174

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Abstract

This paper utilizes advanced methods from Fourier analysis in order to describe periodicities in financial ultrahigh frequency foreign exchange data. The Lomb–Scargle Fourier transform is used to take into account the irregularity in spacing in the time domain. It provides a natural framework for the power spectra of different inhomogeneous time-series processes to be easily and quickly estimated. Furthermore, an event-based approach in intrinsic time based on a power-law relationship is employed using different event thresholds to filter the foreign exchange tick-data. The calculated spectral density demonstrates that the price process in intrinsic time contains different periodic components for directional changes, especially in the medium–long term, implying the existence of stylized facts of ultrahigh frequency data in the frequency domain.

Item Type: Article
Uncontrolled Keywords: ultrahigh frequency transaction data; foreign exchange; irregularly spaced data; Lomb–Scargle Fourier transforms; spectral density
Subjects: H Social Sciences > HG Finance
Q Science > QA Mathematics > QA75 Electronic computers. Computer science
Divisions: Faculty of Social Sciences > Essex Business School
Depositing User: Nick Constantinou
Date Deposited: 10 Sep 2013 08:37
Last Modified: 16 Dec 2014 11:14
URI: http://repository.essex.ac.uk/id/eprint/7539

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