Inverse Statistics in the Foreign Exchange Market

8 Pages Posted: 28 Feb 2004

See all articles by Anders Johansen

Anders Johansen

Riso National Laboratory - Wind Energy Department; University of Copenhagen, Niels Bohr. Inst.; University of California, Los Angeles (UCLA) - Institute of Geophysics and Planetary Physics

Mogens H. Jensen

Niels Bohr Institute

Ingve Simonsen

Nordita

Filippo Petroni

Universita' di L'Aquila

Date Written: February 24, 2004

Abstract

We investigate intra-day foreign exchange (FX) time series using the inverse statistic analysis developed in [1]. Specifically, we study the time-averaged distributions of waiting times needed to obtain a certain increase (decrease) p in the price of an investment. The analysis is performed for the Deutsch mark (DM) against the $US for the full year of 1998, but similar results are obtained for the Japanese Yen against the $US. With high statistical significance, the presence of "resonance peaks" in the waiting time distributions is established. Such peaks are a consequence of the trading habits of the markets participants as they are not present in the corresponding tick (business) waiting time distributions. Furthermore, a new stylized fact, is observed for the waiting time distribution in the form of a power law Pdf. This result is achieved by rescaling of the physical waiting time by the corresponding tick time thereby partially removing scale dependent features of the market activity.

Keywords: Inverse Statistics, FX Market, High-Freq. Data

Suggested Citation

Johansen, Anders and Jensen, Mogens H. and Simonsen, Ingve and Petroni, Filippo, Inverse Statistics in the Foreign Exchange Market (February 24, 2004). Available at SSRN: https://ssrn.com/abstract=508567 or http://dx.doi.org/10.2139/ssrn.508567

Anders Johansen (Contact Author)

Riso National Laboratory - Wind Energy Department ( email )

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University of Copenhagen, Niels Bohr. Inst. ( email )

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University of California, Los Angeles (UCLA) - Institute of Geophysics and Planetary Physics ( email )

Box 951567
Los Angeles, CA 90095-1567
United States
(310) 825 0961 (Phone)
(310) 206 3051 (Fax)

Mogens H. Jensen

Niels Bohr Institute ( email )

Blegdamsvej 17
2100 Kbh.O
Denmark

Ingve Simonsen

Nordita ( email )

Blegdamsvej 17
DK-2100 Copenhagen
Denmark

Filippo Petroni

Universita' di L'Aquila ( email )

Dipartimento di Matematica
Coppito, L'Aquila 67010
Italy

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