An example of this transformation can be reviewed in Sheet 1 column C of the oos_Naive.xls Excel spreadsheet, and is also presented in Figure 1.5. See also the comment in cell C4 for an explanation of the calculations within this column.

An advantage of using a returns series is that it helps in making the time series stationary, a useful statistical property.

Formal confirmation that the EUR/USD returns series is stationary is confirmed at the 1% significance level by both the Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) test statistics, the results of which are presented in Tables 1.2 and 1.3.

The EUR/USD returns series is presented in Figure 1.3. Transformation into returns often creates a noisy time series. Formal confirmation through testing the significance of

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