Discussion Paper

No. 2011-28 | July 28, 2011
A Directional-Change Events Approach for Studying Financial Time Series

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.

Paper submitted to the special issue
New Approaches in Quantitative Modeling of Financial Markets
 

JEL Classification

G10

Cite As

Monira Aloud, Edward Tsang, Richard Olsen, and Alexandre Dupuis (2011). A Directional-Change Events Approach for Studying Financial Time Series. Economics Discussion Papers, No 2011-28, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2011-28

Assessment



Comments and Questions


Anonymous - Referee Report 1
August 23, 2011 - 08:24

See attached file


Monira Aloud - Reply to Referee Report 1
August 23, 2011 - 21:00

See attached file.


Anonymous - Referee Report 2
September 05, 2011 - 14:27

See attached file


Monira Aloud - Reply to Referee Report 2
September 07, 2011 - 15:32

See attached file.


Filed under: