Speculative prices and stochastic processes. (English) Zbl 0728.90021

Gielens, Geert; de Vries, Casper G.

Nieuw Arch. Wiskd., IV. Ser. 8, No. 3, 311-323 (1990).

Summary: Empirical evidence shows that economic variables do not contribute much in explaining the movements of speculative prices like foreign exchange rates. Therefore relatively large gains can be made from analyzing the residuals, for which the theory of stochastic processes is particularly helpful. Three applications are reviewed: tests for unit root processes; extremal theory and the shape of the unconditional distribution function, and the uses of stochastic difference equations for analyzing dependency, in the second moment. Some extensions are discussed.

MSC:

91B84	Economic time series analysis
62M10	Time series, auto-correlation, regression, etc. in statistics (GARCH)
62P20	Applications of statistics to economics

Keywords:

foreign exchange rates; residuals; stochastic processes; unit root processes; extremal theory; unconditional distribution function; stochastic difference equations