Intra-Day and Inter-Market Volatility in Foreign Exchange Rates

Four foreign exchange spot rate series, recorded on an hourly basis for a six-month period in 1986 are examined. A seasonal GARCH model is developed to describe the time-dependent volatility apparent in the percentage nominal return of each currency. Hourly patterns in volatility are found to be rem...

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Bibliographic Details
Published inThe Review of economic studies Vol. 58; no. 3; pp. 565 - 585
Main Authors Baillie, Richard T., Bollerslev, Tim
Format Journal Article
LanguageEnglish
Published Wiley-Blackwell 01.05.1991
Review of Economic Studies Ltd
Subjects
Correlations
Currency
Economic models
Exchange rates
Foreign exchange markets
Foreign exchange rates
Price volatility
Standard error
Statistical variance
Vacations
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Summary:Four foreign exchange spot rate series, recorded on an hourly basis for a six-month period in 1986 are examined. A seasonal GARCH model is developed to describe the time-dependent volatility apparent in the percentage nominal return of each currency. Hourly patterns in volatility are found to be remarkably similar across currencies and appear to be related to the opening and closing of the worlds major markets. Robust LM tests designed to deal with the extreme leptokurtosis in the data fails to uncover any evidence of misspecification or the presence of volatility spillover effects between the currencies or across markets.
Bibliography:ark:/67375/HXZ-Z73TC145-1
istex:DBA62FCD757CB5342A19D6AC5EF594C3E73AD47A
ISSN:0034-6527
1467-937X
DOI:10.2307/2298012