Persistent Dependence in Foreign Exchange Rates? A Reexamination
AbstractWe test for stochastic long-memory behavior in the returns series of currency rates for eighteen industrial countries using a semiparametric fractional estimation method. A sensitivity analysis is also carried out to analyze the temporal stability of the long-memory parameter. Contrary to the findings of some previous studies alluding to the presence of long memory in major currency rates, our evidence provides wide support to the martingale model (and therefore for foreign exchange market efficiency) for our broader sample of foreign currency rates. Any inference of long-range dependence is fragile, especially for the major currency rates. However, long-memory dynamics are found in a small number of secondary (nonmajor) currency rates.
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Bibliographic InfoPaper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 377.
Length: 19 pages
Date of creation: 05 Jun 1998
Date of revision: 21 Apr 2000
Publication status: published as Chapter 10 of Global Financial Markets: Issues and Strategies, D.K. Ghosh and M. Ariff, eds., 2004, Praeger Publishers: Westport CT.
Note: This paper was previously circulated as "A Reexamination of the Long-Memory Evidence in the Foreign Currency Market".
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Foreign exchange; long memory; weak form of market efficiency; Gaussian semiparametric method;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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