Statistical properties of African FX rates: An application of the Stable Paretian Hypothesis

This paper fits Stable Paretian distributions to daily returns data for 41 continental African currencies. Data analysis shows that the returns from all currencies are non-normally distributed and can befitted as non-normal members of the class of stable distributions. This implies that returns for all currencies have infinite variance. In addition, several currencies have characteristic exponents less than unity, implying that no moments exist for these currencies. The implications for mean-variance portfolio management and risk management are also discussed.