Analysis of Dependencies Occurring Between Volatility of Currency Pairs with Euro and Their Tick Volume

Authors

Pages

115-130

Abstract

The presented article fits in with the subject of the currency market. Price volatility and volume seem to allow to accurately assess the situation on the market, therefore the analysis of the type and strength of dependence, occurring between them is important from the point of view of all participants of the forex market transactions. The aim of the study is to verify the hypothesis that there is a strong monotone dependence between the level of exchange rate volatility and the tick volume of a given currency pair, in which euro is the base or quoted currency. Due to the fact that not all time series accepted for the study have a normal distribution, the Spearman rank correlation coefficient was applied to determine the strength of the compound. The research was carried out on the basis of data from EUR/USD, EUR/JPY, EUR/GBP, EUR/CHF and EUR/AUD currency pairs at intervals of one hour, four hours, daily, weekly and monthly in the years 2016- 2018. Based on the research, its hypothesis was rejected. At the same time, it was found that the relationship between volatility and tick volume exists in most cases (88% of all) and in more than half of the cases (60% of all) is at least moderate. The value of the correlation coefficient turned out to be positive in 96% of all examined cases.