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Empirical Study On Foreign Exchange Rate Markets Based On Chaos And Fractal Theory

Posted on:2011-01-21Degree:MasterType:Thesis
Country:ChinaCandidate:Y D TangFull Text:PDF
GTID:2189330332485177Subject:Finance
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The determination and volatility of exchange rates are of importance in economy fields. The theory of exchange rate has evolved for hundreds of years since 14th century. The essay reviewed the history of the evolution for exchange rate systemically although roughly. As human's cognition moved further, the notion of exchange rate gets clearer:from the simple idea of foreign exchange rate to the complex model of chaotic theory, single linear to non-linear; macro-layer to micro-layer, in which frustration can be seen all the time. Technically speaking, the evolution happened to exchange rate can be viewed as a process of loosening the constraints of different hypothesis continually:from the PPP theory to "overshooting" which views PPP not hold in short-term, macro model analysis to introduction of micro factors, and EMH to fractal market where evolution can be observed through the process.Chaos theory and fractal theory are breakthroughs in exchange rate determination fields. It loosens the hypothesis terms of capital markets:rational and homogenous expectations, market efficiency which is not explained reasonably in real world. It utilizes the dynamic principle to explain the volatility of exchange rate. The fractal market hypothesis depicts the tract of rates with self-similarity in time scale. The internal of chaos is composed of orders and laws inside which are presented with infinite self-similar structures. Rescaled range method is exploited and applied to research on the biased random walk with Hurst exponent to present the strength. In using the R/S method, the conclusion can be drawn that the exchange rates are biased random walking.
Keywords/Search Tags:Chaos Theory, Fractal Markets, Exchange Rate, R/S Analysis
PDF Full Text Request
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