A Multifractal Analysis of Asian Foreign Exchange Markets

TL;DR

This paper investigates the multifractal properties of daily Asian foreign exchange rates from 1991 to 2005, revealing how crises and return magnitudes influence market complexity.

Contribution

It provides a comparative multifractal analysis of four Asian FX markets and examines the impact of the 1997 Asian currency crisis on their multifractal spectra.

Findings

Korean and Thai markets showed increased multifractality after the crisis

Multifractality correlates with high return values in the series

All four markets exhibit multifractal features in their return series

Abstract

We analyze the multifractal spectra of daily foreign exchange rates for Japan, Hong-Kong, Korea, and Thailand with respect to the United States Dollar from 1991 to 2005. We find that the return time series show multifractal spectrum features for all four cases. To observe the effect of the Asian currency crisis, we also estimate the multifractal spectra of limited series before and after the crisis. We find that the Korean and Thai foreign exchange markets experienced a significant increase in multifractality compared to Hong-Kong and Japan. We also show that the multifractality is stronge related to the presence of high values of returns in the series.