Autocorrelation as a Source of Truncated Lévy Flights in Foreign Exchange Rates

Annibal Figueiredo, University of Brasilia
Iram Gleria, Federal University of Alagoas
Raul Matsushita, University of Brasilia
Sergio Da Silva, Federal University of Rio Grande Do Sul

Abstract

We suggest that the ultraslow speed of convergence associated with truncated Levy flights may be explained by autocorrelations in data. We show how a particular type of autocorrelation generates power laws consistent with a truncated Levy flight. A novel approach to measure how distant a process is from a Gaussian regime is presented.