Journal Article

No. 2012-36 | September 17, 2012
A Directional-Change Event Approach for Studying Financial Time Series PDF Icon

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, to use physical time scales for studying financial time series runs the risk of missing important activities. An alternative approach is to use an event-based time scale that captures periodic activities in the market. In this paper, the authors use a special type of event, called a directional-change event, and show its usefulness in capturing periodic market activities. The study confirms that the length of the price-curve coastline, as defined by directional-change events, turns out to be a long one.

JEL Classification

G10

Citation

Monira Aloud, Edward Tsang, Richard Olsen, and Alexandre Dupuis (2012). A Directional-Change Event Approach for Studying Financial Time Series. Economics: The Open-Access, Open-Assessment E-Journal, 6 (2012-36): 1—17. http://dx.doi.org/10.5018/economics-ejournal.ja.2012-36

Assessment

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