Multi-Scale Approximate Entropy Analysis of Foreign Exchange Markets Efficiency

Abstract

AbstractMarket efficiency analysis is an important aspect in financial engineering.Based on weak-form efficient markets hypothesis (EMH), we characterize the market efficiency in foreign exchange (FX) markets by using the multi-scale approximate entropy (MApEn) to assess the randomness in FX markets. We split 17 daily FX rates from 1984 to 2011 into there periods by two global events, Southeast Asia currency crisis and American sub-prime crisis. The empirical results indicate that the developed FX markets is more efficient than emerging FX markets, and that the financial crisis promotes the market efficiency in FX markets significantly, especially in emerging markets, like China, Hong Kong, Korea and African market