Article
Nuances of chaos in foreign exchange markets
The Academy of Accounting and Financial Studies Journal
(2000)
Abstract
Is the economy an evolutionary process? Recently, scientists have begun to think that the economic dynamics of free-market societies can be explained by evolutionary dynamics. If so, on the aggregate level then, foreign exchange markets may be driven by a collective "image of the future" that societies are driven by. When economies are viewed as evolutionary processes, it is just possible that on the aggregate, but a subconscious level, competitive forces in foreign exchange markets become endogenous in a system that drives exchange rates towards a collective futuristic image. Moreover, such a system could be deterministic. This paper investigates such possibility in the daily dollar price movements of five major trading currencies and three less actively traded currencies over a 25-year time span beginning with the inception of the floating exchange rate system in 1973. The results of this study suggest that none of the examined currencies are influenced by low-dimensional chaotic determinism. Although three of the examined exchange rates do exhibit signs of being driven by higher-dimensional chaos, this finding does not significantly favor the possibility of predicting these currency movements. As such, very little evidence of a deterministic driving force behind foreign exchange rates is uncovered in this study.
Keywords
- Business,
- Finance,
- Global Markets,
- Foreign Exchange Markets
Disciplines
Publication Date
2000
Citation Information
Vivek Pandey, T. Kohers and G. Kohers. "Nuances of chaos in foreign exchange markets" The Academy of Accounting and Financial Studies Journal Vol. 4 Iss. 2 (2000) p. 1 - 21 Available at: http://works.bepress.com/vivek-pandey/22/