A Directional-Change Events Approach for Studying Financial Time Series

18 Pages Posted: 16 Dec 2011

See all articles by Monira Aloud

Monira Aloud

affiliation not provided to SSRN

Edward Tsang

University of Essex - Centre for Computational Finance and Economic Agents

Richard B. Olsen

Lykke Corp; Olsen & Associates

Alexandre Dupuis

affiliation not provided to SSRN

Date Written: 2011

Abstract

Financial markets witness high levels of activity at certain times, but remain calm at others. This makes the flow of physical time discontinuous. Therefore using physical time scales for studying financial time series, runs the risk of missing important activities. An alternative approach is the use of an event-based time that captures periodic activities in the market. In this paper, we use a special type of event, called a directional-change event, and show its usefulness in capturing periodic market activities. Our study confirms that the length of the price curve coastline as defined by directional-change events, turns out to be a long one.

Keywords: Directional-change event, intrinsic time, high-frequency finance, foreign exchange market, time-series analysis

JEL Classification: G10

Suggested Citation

Aloud, Monira and Tsang, Edward P. K. and Olsen, Richard B. and Dupuis, Alexandre, A Directional-Change Events Approach for Studying Financial Time Series (2011). Economics Discussion Paper No. 2011-28, Available at SSRN: https://ssrn.com/abstract=1973471 or http://dx.doi.org/10.2139/ssrn.1973471

Monira Aloud (Contact Author)

affiliation not provided to SSRN

No Address Available

Edward P. K. Tsang

University of Essex - Centre for Computational Finance and Economic Agents ( email )

Wivenhoe Park
Colchester, Essex CO4 3SQ
United Kingdom

Richard B. Olsen

Lykke Corp ( email )

Baarerstrasse 2
Zug, Zug 6300
Switzerland
41793368950 (Phone)

HOME PAGE: http://www.lykke.com

Olsen & Associates ( email )

Wehrenbachhalde 46
Zurich, 8053
Switzerland
+41 79 336 89 50 (Phone)
+41 (1) 422 22 82 (Fax)

Alexandre Dupuis

affiliation not provided to SSRN

No Address Available

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
643
Abstract Views
2,374
Rank
75,940
PlumX Metrics