Multifractal analysis in foreign exchange markets

Abstract

We investigate the breaking-up mechanism of market information in the view of turbulence. We introduce novel market information and its intensity in the context of a two-phase phenomenon in financial markets. A herding behavior in financial markets emerges from the agglomeration of market information dispersed among agents. In order to find the underlying process of the formation of market information, we perform a multifractal analysis and compare it with the binomial multiplicative process, which is successful in describing fully,, developed turbulence. Through that comparison, we detect a great deviation in the multifractality of the breaking-up process from the prediction of the proposed binomial multiplicative process. To explain this marked deviation, we perform a detrended fluctuation analysis on the intensity of market information.