Interdependence and Dynamics in Currency Futures Markets: A Multivariate Cointegration Analysis of Intra-Day Data

Journal of Banking and Finance, 25 (2001), 1161-1186

Fox School of Business Research Paper

26 Pages Posted: 16 Jun 2014

See all articles by Elyas Elyasiani

Elyas Elyasiani

Temple University - Department of Finance

Ahmet Kocagil

Fitch Ratings Inc.

Date Written: February 4, 1999

Abstract

This paper investigates long-term interdependencies and short-term dynamics in currency futures utilizing intraday data for six major foreign currencies: the British Pound, Deutsche Mark, Swiss Franc, Australian Dollar, Canadian Dollar, and Japanese Yen. Lack of cointegration (CI) among the foreign exchange futures is found to be the prevailing ode of behavior, but some temporary deviations from the no-CI condition are detected. There is a notable overlap between detected CI relationships and the timing of policy changes, world events, and regime shifts, indicating that the observed CIs are event-driven. The robustness of the CI results is checked with respect to variations in the model, lag structure, data period, sample horizon, and currency basket grouping. Impulse-response functions (IRFs) reveal that currency markets are in general efficient and absorb new information within the day. The interdependence among currencies is found to be asymmetric.

Keywords: Intraday data, Foreign currencies, Cointegration

JEL Classification: C3, G13, G15

Suggested Citation

Elyasiani, Elyas and Kocagil, Ahmet, Interdependence and Dynamics in Currency Futures Markets: A Multivariate Cointegration Analysis of Intra-Day Data (February 4, 1999). Journal of Banking and Finance, 25 (2001), 1161-1186; Fox School of Business Research Paper. Available at SSRN: https://ssrn.com/abstract=2451150

Elyas Elyasiani (Contact Author)

Temple University - Department of Finance ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-5881 (Phone)
215-204-5698 (Fax)

Ahmet Kocagil

Fitch Ratings Inc. ( email )

One state street plaza
New York, NY 10004
United States

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