On the efficiency of foreign exchange markets in times of the COVID-19 pandemic.
Identifieur interne : 000A19 ( Main/Exploration ); précédent : 000A18; suivant : 000A20On the efficiency of foreign exchange markets in times of the COVID-19 pandemic.
Auteurs : Faheem Aslam [Pakistan] ; Saqib Aziz [France] ; Duc Khuong Nguyen [France, Viêt Nam] ; Khurrum S. Mughal [Pakistan] ; Maaz Khan [Pakistan]Source :
- Technological forecasting and social change [ 0040-1625 ] ; 2020.
Abstract
We employ multifractal detrended fluctuation analysis (MF-DFA) to provide a first look at the efficiency of forex markets during the initial period of the ongoing coronavirus disease 2019 (COVID-19), which has disrupted the global financial markets. We use high-frequency (5-min interval) data of six major currencies traded in forex markets during the period October 1, 2019 to 31 March 31, 2020. Before applying MF-DFA, we examine the inner dynamics of multifractality through seasonal and trend decompositions using loess. Overall, the results confirm the presence of multifractality in forex markets, which demonstrates, in particular, (i) a decline in the efficiency of forex markets during the COVID-19 outbreak and (ii) heterogeneous effects on the strength of multifractality of exchange rate returns under investigation. The largest effect is observed for the Australian dollar, which shows the highest (lowest) efficiency before (during) the COVID-19 pandemic, assessed in terms of low (high) multifractality. The Canadian dollar and the Swiss Franc exhibit the highest efficiency during the COVID-19 outbreak. Our findings may help policymakers shape a comprehensive response to improve forex market efficiency during such a black swan event.
DOI: 10.1016/j.techfore.2020.120261
PubMed: 32836478
PubMed Central: PMC7428714
Affiliations:
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Mughal</name><affiliation wicri:level="1"><nlm:affiliation>State Bank of Pakistan, Karachi, Pakistan.</nlm:affiliation><country xml:lang="fr">Pakistan</country><wicri:regionArea>State Bank of Pakistan, Karachi</wicri:regionArea><wicri:noRegion>Karachi</wicri:noRegion></affiliation></author><author><name sortKey="Khan, Maaz" sort="Khan, Maaz" uniqKey="Khan M" first="Maaz" last="Khan">Maaz Khan</name><affiliation wicri:level="1"><nlm:affiliation>COMSATS University, Islamabad 45550, Pakistan.</nlm:affiliation><country xml:lang="fr">Pakistan</country><wicri:regionArea>COMSATS University, Islamabad 45550</wicri:regionArea><wicri:noRegion>Islamabad 45550</wicri:noRegion></affiliation></author></analytic><series><title level="j">Technological forecasting and social change</title><idno type="ISSN">0040-1625</idno><imprint><date when="2020" type="published">2020</date></imprint></series></biblStruct></sourceDesc></fileDesc><profileDesc><textClass></textClass></profileDesc></teiHeader><front><div type="abstract" xml:lang="en">We employ multifractal detrended fluctuation analysis (MF-DFA) to provide a first look at the efficiency of forex markets during the initial period of the ongoing coronavirus disease 2019 (COVID-19), which has disrupted the global financial markets. We use high-frequency (5-min interval) data of six major currencies traded in forex markets during the period October 1, 2019 to 31 March 31, 2020. Before applying MF-DFA, we examine the inner dynamics of multifractality through seasonal and trend decompositions using loess. Overall, the results confirm the presence of multifractality in forex markets, which demonstrates, in particular, (i) a decline in the efficiency of forex markets during the COVID-19 outbreak and (ii) heterogeneous effects on the strength of multifractality of exchange rate returns under investigation. The largest effect is observed for the Australian dollar, which shows the highest (lowest) efficiency before (during) the COVID-19 pandemic, assessed in terms of low (high) multifractality. The Canadian dollar and the Swiss Franc exhibit the highest efficiency during the COVID-19 outbreak. Our findings may help policymakers shape a comprehensive response to improve forex market efficiency during such a black swan event.</div></front></TEI><pubmed><MedlineCitation Status="PubMed-not-MEDLINE" Owner="NLM"><PMID Version="1">32836478</PMID><DateRevised><Year>2020</Year><Month>08</Month><Day>31</Day></DateRevised><Article PubModel="Print-Electronic"><Journal><ISSN IssnType="Print">0040-1625</ISSN><JournalIssue CitedMedium="Print"><Volume>161</Volume><PubDate><Year>2020</Year><Month>Dec</Month></PubDate></JournalIssue><Title>Technological forecasting and social change</Title><ISOAbbreviation>Technol Forecast Soc Change</ISOAbbreviation></Journal><ArticleTitle>On the efficiency of foreign exchange markets in times of the COVID-19 pandemic.</ArticleTitle><Pagination><MedlinePgn>120261</MedlinePgn></Pagination><ELocationID EIdType="doi" ValidYN="Y">10.1016/j.techfore.2020.120261</ELocationID><Abstract><AbstractText>We employ multifractal detrended fluctuation analysis (MF-DFA) to provide a first look at the efficiency of forex markets during the initial period of the ongoing coronavirus disease 2019 (COVID-19), which has disrupted the global financial markets. We use high-frequency (5-min interval) data of six major currencies traded in forex markets during the period October 1, 2019 to 31 March 31, 2020. Before applying MF-DFA, we examine the inner dynamics of multifractality through seasonal and trend decompositions using loess. Overall, the results confirm the presence of multifractality in forex markets, which demonstrates, in particular, (i) a decline in the efficiency of forex markets during the COVID-19 outbreak and (ii) heterogeneous effects on the strength of multifractality of exchange rate returns under investigation. The largest effect is observed for the Australian dollar, which shows the highest (lowest) efficiency before (during) the COVID-19 pandemic, assessed in terms of low (high) multifractality. The Canadian dollar and the Swiss Franc exhibit the highest efficiency during the COVID-19 outbreak. Our findings may help policymakers shape a comprehensive response to improve forex market efficiency during such a black swan event.</AbstractText><CopyrightInformation>© 2020 Elsevier Inc. All rights reserved.</CopyrightInformation></Abstract><AuthorList CompleteYN="Y"><Author ValidYN="Y"><LastName>Aslam</LastName><ForeName>Faheem</ForeName><Initials>F</Initials><AffiliationInfo><Affiliation>COMSATS University, Islamabad 45550, Pakistan.</Affiliation></AffiliationInfo></Author><Author ValidYN="Y"><LastName>Aziz</LastName><ForeName>Saqib</ForeName><Initials>S</Initials><AffiliationInfo><Affiliation>Rennes School of Business, 2 Rue Robert d'Arbrissel, Rennes 35065, France.</Affiliation></AffiliationInfo></Author><Author ValidYN="Y"><LastName>Nguyen</LastName><ForeName>Duc Khuong</ForeName><Initials>DK</Initials><AffiliationInfo><Affiliation>IPAG Business School, Paris, France.</Affiliation></AffiliationInfo><AffiliationInfo><Affiliation>International School, Vietnam National University, Hanoi, Vietnam.</Affiliation></AffiliationInfo></Author><Author ValidYN="Y"><LastName>Mughal</LastName><ForeName>Khurrum S</ForeName><Initials>KS</Initials><AffiliationInfo><Affiliation>State Bank of Pakistan, Karachi, Pakistan.</Affiliation></AffiliationInfo></Author><Author ValidYN="Y"><LastName>Khan</LastName><ForeName>Maaz</ForeName><Initials>M</Initials><AffiliationInfo><Affiliation>COMSATS University, Islamabad 45550, Pakistan.</Affiliation></AffiliationInfo></Author></AuthorList><Language>eng</Language><PublicationTypeList><PublicationType UI="D016428">Journal Article</PublicationType></PublicationTypeList><ArticleDate DateType="Electronic"><Year>2020</Year><Month>08</Month><Day>15</Day></ArticleDate></Article><MedlineJournalInfo><Country>United States</Country><MedlineTA>Technol Forecast Soc Change</MedlineTA><NlmUniqueID>101085131</NlmUniqueID><ISSNLinking>0040-1625</ISSNLinking></MedlineJournalInfo><KeywordList Owner="NOTNLM"><Keyword MajorTopicYN="N">COVID-19 pandemic</Keyword><Keyword MajorTopicYN="N">Efficiency</Keyword><Keyword MajorTopicYN="N">Forex market</Keyword><Keyword MajorTopicYN="N">High frequency</Keyword><Keyword MajorTopicYN="N">MF-DFA</Keyword></KeywordList><CoiStatement>None.</CoiStatement></MedlineCitation><PubmedData><History><PubMedPubDate PubStatus="received"><Year>2020</Year><Month>06</Month><Day>09</Day></PubMedPubDate><PubMedPubDate PubStatus="revised"><Year>2020</Year><Month>08</Month><Day>10</Day></PubMedPubDate><PubMedPubDate PubStatus="accepted"><Year>2020</Year><Month>08</Month><Day>11</Day></PubMedPubDate><PubMedPubDate PubStatus="pubmed"><Year>2020</Year><Month>8</Month><Day>25</Day><Hour>6</Hour><Minute>0</Minute></PubMedPubDate><PubMedPubDate PubStatus="medline"><Year>2020</Year><Month>8</Month><Day>25</Day><Hour>6</Hour><Minute>1</Minute></PubMedPubDate><PubMedPubDate PubStatus="entrez"><Year>2020</Year><Month>8</Month><Day>25</Day><Hour>6</Hour><Minute>0</Minute></PubMedPubDate></History><PublicationStatus>ppublish</PublicationStatus><ArticleIdList><ArticleId IdType="pubmed">32836478</ArticleId><ArticleId IdType="doi">10.1016/j.techfore.2020.120261</ArticleId><ArticleId IdType="pii">S0040-1625(20)31087-8</ArticleId><ArticleId IdType="pii">120261</ArticleId><ArticleId IdType="pmc">PMC7428714</ArticleId></ArticleIdList><pmc-dir>pmcsd</pmc-dir>
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