The message in daily exchange rates: A conditional-variance tale


Journal Article

Formal testing procedures confirm the presence of a unit root in the autoregressive polynomial of the univariate time series representation of daily exchange-rate data. The first differences of the logarithms of daily spot rates are approximately uncorrelated through time, and a generalized autoregressive conditional heteroscedasticity model with daily dummy variables and conditionally t-distributed errors is found to provide a goad representation to the leptokurtosis and time-dependent conditional heteroscedasticity. The parameter estimates and characteristics of the models are found to be very similar for six different currencies. These apparent stylized facts carry over to weekly, fortnightly, and monthly data in which the degree of leptokurtosis and time-dependent heteroscedasticity is reduced as the length of the sampling interval increases.

Full Text

Cited Authors

  • Baillie, RT; Bollerslev, T

Published Date

  • January 1, 2002

Published In

Volume / Issue

  • 20 / 1

Start / End Page

  • 60 - 68

International Standard Serial Number (ISSN)

  • 0735-0015

Digital Object Identifier (DOI)

  • 10.1198/073500102753410390

Citation Source

  • Scopus