PROJECT

Present By

NAME : P.SAMPATH Roll No :08BIA1072

TITLE

AN EMPIRICAL ANALYSIS ON CURRENCY BASKET CONSTRUCTION IN TUNE OF HIGH RETURNS WITH RESPECT TO MULTIPLE CURRENCIES.

BACKGROUND OF STUDY

In order to start trading in the currency market, the investor must understand the Forex market basic terminology used in the Forex market, including gaining the knowledge for interpreting the Forex market currency pair quotations. For every transaction made in the Forex market the investor must realize that there is a simultaneous buying and selling of two currencies. These two currencies make up a currency pair. Below is another example of the US dollar exchange rate in relation to the Japanese Yen.

Although there are many currencies throughout the world, 85% of all the daily operations involve the buying and selling a group of currencies called the principal pairs or majors. These currencies consist of the US Dollar, the Japanese Yen, and the Euro, the British Pound Sterling, the Swiss Franc, the Canadian Dollar and the Australian dollar.

STATEMENT OF PROBLEM

There are different types of participants within the Forex market, All of them usually look for very different results when doing business. That is why, although Forex market is usually described as a game of zero sum, meaning that for what one investor wins another one must lose. However, there are an infinite number opportunities to make a profit in the Forex market.

PRIMARY OBJECTIVE

An empirical analysis on currency basket construction in tune of high returns with respect to multiple currencies.

CURRENCY LIST

American Dollar Australian Dollar British Pound Canadian Dollar Chinese Yuan Euro Japanese Yen Kuwaiti Dinar Malaysian Ringgit New Zealand Dollar Singapore Dollar Swiss Franc Indian Rupee

Secondary Objective

1 . To analyze the impact of price of one

currency with another currency in our currency basket. 2 . To assess the extent of price variation in various currencies. 3 . To identify the combination of currencies which will give the high return. 4 . To offer suitable suggestion to investor for investing in various currencies.

METHODOLOGY

Research Design Descriptive method used to analyzing the performance of the currencies. Sampling Design The study is based on random sampling method. The analytical frame work of the study is purely relating to descriptive and analytical in nature. Data Collection The researcher has collected the relevant data from the published sources such as Forex.com, money control.com and Google.com.

Tools and Techniques

To go with the objectives of the study, the following tools and techniques were applied for the study. Correlation Analysis Regression Analysis Moving Average Testing of Hypothesis.

Correlation Analysis

Meaning of correlation Correlation is the relation that exists between two or more variable. If two variable are related to each other in such a way that change in one creates a corresponding change in the other, then the variable are said to be correlated.

Karl Pearsons coefficient of correlation

Definition- Given a set of pairs of observation relating to two variables X and Y, Coefficient of Correlation between X and Y, denoted by the symbol r is defined as Where, Cov.(X,Y) =Covariance of X and Y =Standard Deviation of X variable =Standard Deviation of variable Y

xy x y
2

REGRESSION ANALYSIS

Regression analysis is a statistical tool to study the nature and extent of functional relationship between two or more variables and to estimate (or predict) the unknown values of dependent variables from the known values of independent variables .

Regression Line of X on Y X = a + bY
The value of two constants a and b can be calculated for the given data of X and Y variable by solving the following two algebraic normal equations:

Na b Y
2

XY a Y b Y

MOVING AVERAGE

Testing of Hypothesis