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Cross-correlations and cross-bicorrelations in Sterling exchange rates

Brooks, C. and Hinich, M. J. (1999) Cross-correlations and cross-bicorrelations in Sterling exchange rates. Journal of Empirical Finance, 6 (4). pp. 385-404. ISSN 0927-5398

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To link to this item DOI: 10.1016/S0927-5398(99)00007-9

Abstract/Summary

This paper proposes two new tests for linear and nonlinear lead/lag relationships between time series based on the concepts of cross-correlations and cross-bicorrelations, respectively. The tests are then applied to a set of Sterling-denominated exchange rates. Our analysis indicates that there existed periods during the post-Bretton Woods era where the temporal relationship between different exchange rates was strong, although these periods have become less frequent over the past 20 years. In particular, our results demonstrate the episodic nature of the nonlinearity, and have implications for the speed of flow of information between financial series. The method generalises recently proposed tests for nonlinearity to the multivariate context.

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > ICMA Centre
ID Code:35967
Publisher:Elsevier

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