Cross-correlations and cross-bicorrelations in Sterling exchange rates |
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| Institution: | 1. ISMA Centre, The University of Reading, P.O. Box 242, Whiteknights, Reading RG6 6BA, UK;2. University of Texas at Austin, Austin, TX, USA;1. University of Lille 2, Lille, France;2. Foreign Trade University, Vietnam;3. Skema Business School-LSMRC, Lille, France;1. School of Civil Engineering, Beijing Jiaotong University, Beijing 100044, China;2. Key Laboratory for Damage Diagnosis of Engineering Structures of Hunan Province, College of Civil Engineering, Hunan University, Changsha 410082, China;1. State Key Laboratory of Chemical Engineering, East China University of Science and Technology, Shanghai 200237, China;2. Shanghai Synchrotron Radiation Facility, Shanghai Institute of Applied Physics, Chinese Academy of Sciences, Shanghai 201204, China;3. Department of Chemical Engineering, Norwegian University of Science and Technology, Trondheim N-7491, Norway;1. Brooklyn College CUNY, Brooklyn, NY, United States;2. University of Southampton, SO17 1BJ, United Kingdom;3. East Carolina University, Greenville, NC, 27858-4353, United States |
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| Abstract: | 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. |
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