Antipersistent Markov behavior in foreign exchange markets

A quantitative check of efficiency in US dollar/Deutsche mark exchange rates is developed using high-frequency (tick by tick) data. The antipersistent Markov behavior of log-price fluctuations of given size implies, in principle, the possibility of a statistical forecast. We introduce and measure the available information of the quote sequence, and we show how it can be profitable following a particular trading rule.

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Year of publication:	2002
Authors:	Baviera, Roberto ; Pasquini, Michele ; Serva, Maurizio ; Vergni, Davide ; Vulpiani, Angelo
Published in:	Physica A: Statistical Mechanics and its Applications. - Elsevier, ISSN 0378-4371. - Vol. 312.2002, 3, p. 565-576
Publisher:	Elsevier
Subject:	Markov process \| Exchange rate \| Shannon entropy \| Forecasting

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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