Recurrence Plots of Exchange Rates of Currencies

Author(s): Amelia Carolina Sparavigna

Used to investigate the presence of distinctive recurrent behaviours in natural processes, the recurrence plots can be applied to the analysis of economic data, and, in particular, to the characterization of exchange rates of currencies too. In this paper, we will show that these plots are able to characterize the periods of oscillation and random walk of currencies and enhance their reply to news and events, by means of texture transitions. The examples of recurrence plots given here are obtained from time series of exchange rates of Euro.

Recurrence Plots, Texture Transitions, Currencies, Euro, US Dollar, GB Pound, Japanese Yen, Exchange Rates, Autoregressive Models, Econometrics

1. Lean Yu, Shouyang Wang and Kin Keung Lai, Foreign-Exchange-Rate Forecasting with Artificial Neural Networks, Springer Science & Business Media, 02/ago/2007
2. C. Ullrich, Forecasting and Hedging in the Foreign Exchange Markets, Springer Science & Business Media, 30/mag/2009
3. P. Krugman and M. Obstfeld, International Economics: Theory and Policy, New York, Harper Collins, 1994.
4. Sauder School of Business, University of British Columbia, at fx.sauder.ubc.ca/trends.html
5. J.-P. Eckmann, S.O. Kamphorst and D. Ruelle, Recurrence Plots of Dynamical Systems, Europhysics Letters, 1987, Volume 5, Pages 973-977
6. J.-P. Eckmann and D. Ruelle, Ergodic Theory of Chaos and Strange Attractors, Review of Modern Physics, 1985, Volume 57, Issue 3, Pages 617-656
7. A.C. Sparavigna, Recurrence Plots from Altimetry Data of Some Lakes in Africa, The International Journal of Sciences, 2014, Volume 3, Issue 7, Pages 19-27
8. R. Baillie and P.C. McMahon, The Foreign Exchange Market: Theory and Econometric Evidence, Cambridge University Press, New York, 1989
9. L.S. Copeland, Exchange Rates and International Finance, Addison - Wesley, Reading Mass., 1990
10. P. Isard, Exchange Rate Economics, Cambridge University Press, Cambridge, 1995
11. R. MacDonald and M.P. Taylor, Exchange Rate Economics: A Survey, EconPapers: IMF Staff Papers, 1992, Volume 39, Issue 1, Pages 1-57
12. Vv. Aa., Wikipedia, /wiki/Predictive_analytics
13. Vv. Aa., Wikipedia /wiki/Autoregressive_conditional_ heteroskedasticity
14. Gawoon Yoon, Do Real Exchange Rates Really Follow Threshold Autoregressive or Exponential Smooth Transition Autoregressive Models?, Economic Modelling, Volume 27, Issue 2, March 2010, Pages 605–612
15. J. Belaire-Franch, D. Contreras and L. Tordera-Lledó, Assessing Nonlinear Structures in Real Exchange Rates Using Recurrence Plot Strategies, Physica D: Nonlinear Phenomena, 2002, Volume 171, Issue 4, Pages 249–264.
16. J. Belaire-Franch and D. Contreras, Recurrence Plots in Nonlinear Time Series Analysis: Free Software, Technical Report, Universidad de Valencia, 2001
17. E. Kononov, Visual Recurrence Analysis, www.visualization-2002.org/
18. E. Kononov, visual-recurrence- analysis.software.informer.com/4.9/
19. Investing.com, http://it.investing.com/
20. it.investing.com/ currencies/ eur-usd-historical-data
21. B. Pecar, Visual Recurrence Analysis as an Alternative Framework for Time Series Characterisation, Computer Finance and its Applications, WIT Press, 2004, Pages 241-252
22. D.G. Aliaga and A.A. Lastra, Smooth Transitions in Texture-Based Simplification, Computer & Graphics, Elsevier Science, 1998, Volume 22, Issue 1, Pages 71-81
23. B. Montrucchio, A. Sparavigna and A. Strigazzi, A New Image Processing Method for Enhancing the Detection Sensitivity of Smooth Transitions in Liquid Crystals, Liquid Crystals, 1998, Volume 24, Issue 6, Pages 841-852
24. A. Sparavigna, A. Mello and B. Montrucchio, Texture Transitions in the Liquid Crystalline Alkyloxybenzoic Acid 6OBAC, Phase Transitions, 2006, Volume 79, Pages 293-303
25. L. Kihara and S. White, BOJ to Pump $1.4 Trillion into Economy in Unprecedented Stimulus, Reuters, 4 April 2013