Behaviour of the Foreign Exchange Rates of BRICS: Is it Chaotic?

2018 ◽  
Vol 11 (2) ◽  
pp. 1-19 ◽  
Author(s):  
Sharad Nath Bhattacharya ◽  
Mousumi Bhattacharya ◽  
Basav Roychoudhury
Keyword(s):  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Deterministic Chaos ◽  
Nonlinear Dependence ◽  
Foreign Exchange Rates ◽  
Brics Countries ◽  
Long Run ◽  
Chaotic Nature

The article focuses on the behaviour of foreign exchange rates of BRICS countries in reference to US dollar with special emphasis on examining presence of nonlinear dependence and deterministic chaos. The findings did not indicate random walk behaviour in the returns for all exchange rates and performance of GARCH as well as EGARCH models are reasonably good in capturing the conditional volatility. Further evidences suggest existence of nonlinear dependence and we compute Maximal Lyapunov Exponent and Correlation Dimension test with multiple surrogate series which confirms the chaotic nature of the exchange rates for all countries under study except for South Africa. The findings support short run predictability in exchange rates while long run predictions are unlikely to be successful. The chaotic nature of the foreign exchange market calls for newer intervention mechanism by the Central Bank of the respective countries to limit the exchange rate volatility.

Modeling Volatility of Exchange Rates Returns in the Nigerian Foreign Exchange Market in the Presence of Non-Gaussian Errors

2019 ◽  
Vol 1 ◽  
pp. 246-258
Author(s):  
D A Kuhe ◽  
J T Aarga ◽  
I T Ayigege
Keyword(s):  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Good News ◽  
Foreign Exchange Rates ◽  
Exchange Market ◽  
Volatility Clustering ◽  
Long Run ◽  
Modeling Volatility ◽  
Non Gaussian

This study investigates volatility behaviour of exchange rates returns of Naira against CFA, Euro, Great British Pounds, US Dollar, West African Unit of Account (WAUA) and Japanese Yen in Nigeria using historical volatility approach as well as symmetric and asymmetric Autoregressive Conditional Heteroskedasticity (GARCH) models in the presence of non-Gaussian errors. The study utilizes daily quotations of these exchange rates from 12/11/2001 to 04/13/2018 making a total of 4008 observations each. Historical (annualized) volatility approach as well as symmetric GARCH (1,1) and asymmetric EGARCH (1,1) models were used to model the exchange rates return series. Results showed that CFA and USD have the highest and least annualized volatilities (market risk) respectively among the six exchange rates returns as measured by historical approach. The symmetric GARCH (1,1) model showed volatility clustering with evidence of shock persistence in the six exchange rates return series. The asymmetric EGARCH (1,1) model found evidence of asymmetry and leverage effects in the Nigerian foreign exchange market indicating that negative shocks (bad news) generate more volatility than positive shocks (good news) of similar magnitudes. All the estimated models were found to be stationary and mean reverting indicating the predictability and stability of the conditional variances of the foreign exchange rates returns. This result suggests that no matter how high or low the foreign exchange rates shall move in the exchange market, they shall eventually return to their long-run averages. Stationary and mean reverting stocks provide good and long term investment opportunities for investors.

scholarly journals The asymmetric impact of consumer sentiment announcements on Australian foreign exchange rates

2011 ◽  
Vol 36 (3) ◽  
pp. 387-403 ◽  
Author(s):  
Shumi Akhtar ◽  
Robert Faff ◽  
Barry Oliver
Keyword(s):  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Foreign Exchange Rates ◽  
Asymmetric Effect ◽  
Consumer Sentiment ◽  
Australian Dollar ◽  
Negativity Effect ◽  
Asymmetric Impact ◽  
Psychology Literature

We examine the effect of consumer sentiment announcements on changes in 13 of the more common foreign exchange rates against the Australian dollar using a consumer sentiment index (CSI). Generally, we find that the CSI possesses information that influences the foreign exchange market. However, we observe an asymmetric effect – when a lower than previous month CSI is announced, the Australian dollar experiences a significant depreciation on the announcement day, but there is no matching appreciation when positive CSI news occurs. This supports the negativity effect documented in the psychology literature and in the Australian stock market. There is no evidence that the effect is non-linear.

scholarly journals The foreign exchange market in Barcelona at the beginning of the fifteenth century

2021 ◽  
pp. 1-28
Author(s):  
Angela Orlandi ◽  
Giacomo Toscano
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Fifteenth Century ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Exchange Market ◽  
Macroeconomic Factors ◽  
Local Currency ◽  
European Markets

Based on the reconstruction of the monetary flows of a merchant-banking company operating in Barcelona at the beginning of the fifteenth century, this study aims to understand the reasons behind exchange-rate variations in the local currency with respect to the principal European markets, as well as the modalities and predictability of such oscillations. By using real rather than ‘hearsay’ rates, we present new assessments of the seasonal character of exchange rates and their sensitivity to conditions of currency abundance or shortage. In addition, econometric analysis shows that exchange-rate volatility was quite modest and dependent on geographic and macroeconomic factors, such as the system of commercial flows.

scholarly journals Persistence And Asymmetry In Exchange Rate Volatility

2012 ◽  
Vol 11 (9) ◽  
pp. 971
Author(s):  
S. Aun Hassan
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
The United States ◽  
Good News ◽  
Economic Downturn ◽  
Exogenous Shocks ◽  
The Past

Recent economic downturn in the United States and Europe has affected major currencies around the world. This paper focuses on the behavior of exchange rates over the past decade to study how volatility pattern of these exchange rates responds to any exogenous shocks. The paper focuses on persistence and asymmetry in volatility of major exchange rates due to exogenous shocks. The paper employs a univariate GARCH and an EGRACH model to test the persistence and asymmetry of exchange rate volatility using data from the past decade plus. The results show high persistence and asymmetric behavior in volatility implying that the effect of good news on exchange rates is different from the effect of bad news. The results of this paper have important implications for foreign exchange investors and will provide a better understanding of the foreign exchange market to interested observers.

scholarly journals Performance of technical indicators in forecasting high-frequency foreign exchange rates

2004 ◽  
Vol 52 (3) ◽  
pp. 157-166
Author(s):  
Václav Mastný
Keyword(s):  
Time Series ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
High Frequency ◽  
Foreign Exchange Market ◽  
Technical Analysis ◽  
Foreign Exchange Rates ◽  
Exchange Market ◽  
Technical Indicators

This paper deals with technical analysis and its forecasting ability in the intradaily foreign exchange market. The objective of this study is to investigate whether technical indicators are able to provide prediction superior to „buy and hold“ strategy. Each indicator is tested with series of parameters in time series of different frequency (5, 15, 30, 60 min). The profitability of each indicator is examined in simple trading modell.

scholarly journals The Exchange Rate Volatility in Indonesia and Policy Response

2014 ◽  
Author(s):  
Ferry Syarifuddin
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Exchange Rates ◽  
Interest Rates ◽  
Foreign Exchange ◽  
Exchange Rate Volatility ◽  
Commodity Prices ◽  
Policy Response ◽  
Long Run ◽  
The Exchange Rate

High fluctuation of exchange rate in short horizon is obviously making economic activity more risky as uncertainty rises. Moreover, volatile exchange rates also make commodity prices, interest rates and a host of other variables more volatile as well. Although changes in long-run exchange rates tend to undergo relatively gradual shifts, in the shorter horizon, the exchange rate might be very volatile. Then there should be a systematic and measured policy to mitigate the foreign exchange fluctuations and to minimize the fluctuations as well as to drive it to its fundamental value. In this part, USD/IDR volatility is investigated using GARCH approach. The results reveal that, USD/IDR volatility in Indonesia is persistent. On the other hand, the following studies also present the outcomes of effectiveness of policy response by the Central Bank. Foreign-exchange sale interventions by the Central Bank lead conditional volatility of the USD/IDR to decrease slightly.

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