Nonlinearities in the black market zloty-dollar exchange rate: some further evidence
AbstractThis study reappraises the evidence for nonlinear dependence in the monthly black market exchange returns of the Polish zloty, 1955-1990. Predictive asymmetry is reported in conditional variance such that depreciatory shocks have a greater impact on subsequent volatility than appreciatory shocks, jointly with conditional mean nonlinearity of smooth transition between regimes which suggests a simple trading strategy capable of generating positive profit over the sample period. However, support is also found for a competing variance in mean model consistent with a time varying risk premium that is able to rationalize the presence of unexploited profit opportunities, particularly over the latter half of the sample.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Financial Economics.
Volume (Year): 11 (2001)
Issue (Month): 2 ()
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