Title: The effects of interest rates, stock prices and trading day to the duration of daily exchange rate pattern: using survival analysis

Authors: Seo-Hyeong Lee; Ki-Dong Lee; Yoon Chul Kim

Addresses: Department of International Commerce, Keimyung University, 1095 Dalgubeol-daero, Dalseo-gu, Daegu, 42601, South Korea ' Department of International Commerce, Keimyung University, 1095 Dalgubeol-daero, Dalseo-gu, Daegu, 42601, South Korea ' Department of Economics and Finance, Keimyung University, 1095 Dalgubeol-daero, Dalseo-gu, Daegu, 42601, South Korea

Abstract: This paper examined the predictability of daily exchange rates by identifying the factors that affected the duration of pattern, as well as estimating the probability of escape from the current variation pattern of exchange rates. Survival analysis technique was applied to 12 major daily currency/dollar exchange rates for the period from January 1999 to September 2012. The results show that the US dollar exchange rate is stable against major currencies and has a cyclical pattern, with both the appreciation and depreciation phases containing almost the same number of events. The cumulative probability for the persistence of an exchange rate cycle for five days decreased sharply to 5%. Interestingly, the study confirmed that the duration of declining interest rates, the duration of declining stock prices, and whether the first day of the present cycle follows a non-business day have major statistically significant effects on the duration of an exchange rate pattern.

Keywords: exchange rate; survival analysis; hazard rate; duration; cumulative probability.

DOI: 10.1504/IJMEF.2017.087485

International Journal of Monetary Economics and Finance, 2017 Vol.10 No.3/4, pp.404 - 425

Received: 05 Sep 2015
Accepted: 17 Jun 2016
Published online: 16 Oct 2017 *

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