Statistical Properties of the Foreign Exchange Network at Different Time Scales: Evidence from Detrended Cross-Correlation Coefficient and Minimum Spanning Tree
Open Access
- 6 May 2013
- Vol. 15 (5), 1643-1662
- https://doi.org/10.3390/e15051643
Abstract
We investigate the statistical properties of the foreign exchange (FX) network at different time scales by two approaches, namely the methods of detrended cross-correlation coefficient (DCCA coefficient) and minimum spanning tree (MST). The daily FX rates of 44 major currencies in the period of 2007–2012 are chosen as the empirical data. Based on the analysis of statistical properties of cross-correlation coefficients, we find that the cross-correlation coefficients of the FX market are fat-tailed. By examining three MSTs at three special time scales (i.e., the minimum, medium, and maximum scales), we come to some conclusions: USD and EUR are confirmed as the predominant world currencies; the Middle East cluster is very stable while the Asian cluster and the Latin America cluster are not stable in the MSTs; the Commonwealth cluster is also found in the MSTs. By studying four evaluation criteria, we find that the MSTs of the FX market present diverse topological and statistical properties at different time scales. The scale-free behavior is observed in the FX network at most of time scales. We also find that most of links in the FX network survive from one time scale to the next.This publication has 56 references indexed in Scilit:
- EVOLUTION OF SHANGHAI STOCK MARKET BASED ON MAXIMAL SPANNING TREESModern Physics Letters B, 2012
- Evolvement of Uniformity and Volatility in the Stressed Global Financial VillagePLOS ONE, 2012
- Dominating Clasp of the Financial Sector Revealed by Partial Correlation Analysis of the Stock MarketPLOS ONE, 2010
- The foreign exchange market: return distributions, multifractality, anomalous multifractality and the Epps effectNew Journal of Physics, 2010
- Correlation structure and dynamics in volatile marketsNew Journal of Physics, 2010
- Time-lag cross-correlations in collective phenomenaEurophysics Letters, 2010
- The use of dynamical networks to detect the hierarchical organization of financial market sectorsZeitschrift für Physik B Condensed Matter, 2009
- Scale free effects in world currency exchange networkZeitschrift für Physik B Condensed Matter, 2008
- Universal and Nonuniversal Properties of Cross Correlations in Financial Time SeriesPhysical Review Letters, 1999
- Mosaic organization of DNA nucleotidesPhysical Review E, 1994