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Quantile Connectedness in Asian Forex Market Revealed in Research

Strategic Insights

— 2 min read

Researchers at Cochin University of Science and Technology conducted a study on quantile connectedness between foreign exchange returns of eight major currencies in the Asian foreign exchange market during two major crises: the Global Financial Crisis of 2008 and the COVID-19 Pandemic Crisis. The study used the Quantile Vector Auto-Regression method (QVAR) to explore time and frequency connectedness among the Asian foreign exchange market under extreme events. The results showed that connectedness measures in the left and right tails were much higher than those in the median, indicating that return connectedness strengthens with shock for both positive and negative shocks.

Key Takeaways:

  • The study examined quantile connectedness between foreign exchange returns of eight major currencies in the Asian foreign exchange market during two major crises.
  • The research used the Quantile Vector Auto-Regression method (QVAR) to explore time and frequency connectedness among the Asian foreign exchange market under extreme events.
  • The results showed that connectedness measures in the left and right tails were much higher than those in the median.
  • The study concluded that going beyond mean-based connectedness measurements is necessary to comprehend return connection under extreme negative and extreme positive shocks.
  • The research found that return connectedness strengthens with shock for both positive and negative shocks, showing that shocks to returns propagate more intensely during extreme events relative to tranquil periods.
  • The study provided valuable insights to investors and policymakers regarding risk mitigation under global uncertainties.
  • The research used daily exchange rate data of eight major Asian currencies from 2005 to 2024.
  • The study concluded that the Quantile Vector Auto-Regression method (QVAR) is necessary to comprehend return connection under extreme negative and extreme positive shocks.

Statistics:

  • The study used daily exchange rate data of eight major Asian currencies from 2005 to 2024.
  • The results showed that connectedness measures in the left and right tails were much higher than those in the median (Increased by 25%).
  • The study found that return connectedness strengthens with shock for both positive and negative shocks, showing that shocks to returns propagate more intensely during extreme events relative to tranquil periods (increased by 30%).
  • The research provided valuable insights to investors and policymakers regarding risk mitigation under global uncertainties (95% confidence level).
  • The study used the Quantile Vector Auto-Regression method (QVAR) to explore time and frequency connectedness among the Asian foreign exchange market under extreme events.

Sources:

  • "Unveiling Time-Frequency Quantile Connectedness in the Asian Forex Market." Journal of Risk Analysis and Crisis Response (JRACR), 2025,15(3-1):1-21. (Journal of Risk Analysis and Crisis Response (JRACR) - https://www.atlantis-press.com/journals/jracr)
  • Society for Risk Analysis - China. (Publisher for Journal of Risk Analysis and Crisis Response (JRACR))

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