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Open Physics

formerly Central European Journal of Physics

Editor-in-Chief: Feng, Jonathan

Managing Editor: Lesna-Szreter, Paulina

1 Issue per year


IMPACT FACTOR 2016 (Open Physics): 0.745
IMPACT FACTOR 2016 (Central European Journal of Physics): 0.765

CiteScore 2016: 0.82

SCImago Journal Rank (SJR) 2015: 0.458
Source Normalized Impact per Paper (SNIP) 2015: 1.142

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Online
ISSN
2391-5471
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Volume 10, Issue 3 (Jun 2012)

Issues

Dynamics of episodic transient correlations in currency exchange rate returns and their predictability

Milan Žukovič
  • SORS Research a.s., Moyzesova 38, 040 01, Košice, Slovakia
  • Department of Theoretical Physics and Astrophysics, Faculty of Science, P. J. Šafárik University, Park Angelinum 9, 041 54, Košice, Slovakia
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Published Online: 2012-06-17 | DOI: https://doi.org/10.2478/s11534-011-0120-6

Abstract

We study the dynamics of the linear and non-linear serial dependencies in financial time series in a rolling window framework. In particular, we focus on the detection of episodes of statistically significant two- and three-point correlations in the returns of several leading currency exchange rates that could offer some potential for their predictability. We employ a rolling window approach in order to capture the correlation dynamics for different window lengths and analyze the distributions of periods with statistically significant correlations. We find that for sufficiently large window lengths these distributions fit well to power-law behavior. We also measure the predictability itself by a hit rate, i.e. the rate of consistency between the signs of the actual returns and their predictions, obtained from a simple correlation-based predictor. It is found that during these relatively brief periods the returns are predictable to a certain degree and the predictability depends on the selection of the window length.

Keywords: financial time series; episodic non-linearity; bicorrelation; time series prediction

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About the article

Published Online: 2012-06-17

Published in Print: 2012-06-01


Citation Information: Open Physics, ISSN (Online) 2391-5471, DOI: https://doi.org/10.2478/s11534-011-0120-6.

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© 2012 Versita Warsaw. This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License. BY-NC-ND 3.0

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