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The Distribution of Foreign Exchange Price Changes: Trading Day Effects and Risk Measurement
Author(s) -
McFARLAND JAMES W.,
PETTIT R. RICHARDSON,
SUNG SAM K.
Publication year - 1982
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1982.tb02218.x
Subject(s) - thursday , liberian dollar , names of the days of the week , settlement (finance) , economics , foreign exchange , monetary economics , us dollar , distribution (mathematics) , exchange rate , business , mathematics , finance , philosophy , linguistics , payment , mathematical analysis
This study investigates the nature of price changes in a variety of major and minor foreign exchange markets. The results suggest that the log of price changes over one (trading) day intervals seems to follow a non‐normal stable distribution function. Different measures of location (and to lesser extent scale) are present for different days of the week. Dollar denominated price changes are high on Mondays and Wednesdays and low on Thursdays and Fridays for all currencies. The Wednesday‐Thursday result is consistent with the settlement procedures used in foreign exchange transactions in the dollar. The Friday‐Monday result is consistent with an increase in demand for the dollar prior to the weekend.