Scaling, Self-Similarity and Multifractality in FX Markets
New York University
Simon Fraser University
November 14, 2002
Physica A, 323, pp. 578 – 590, 2003
This paper presents an empirical investigation of scaling and multifractal properties of US Dollar–Deutschemark (USD–DEM) returns. The data set is ten years of 5-min returns. The cumulative return distributions of positive and negative tails at different time intervals are linear in the double logarithmic space. This presents strong evidence that the USD–DEM returns exhibit power-law scalingin the tails. To test the multifractal properties of USD–DEM returns, the mean moment of the absolute returns as a function of time intervals is plotted for different powers of absolute returns. These moments show different slopes for these powers of absolute returns. The nonlinearity of the scalingexponent indicates that the returns are multifractal.
Number of Pages in PDF File: 13
Keywords: Scaling, Self-similarity, Multifractality, High-frequency data, Foreign exchange markets
JEL Classification: G0, G1, C1Accepted Paper Series
Date posted: May 4, 2012
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