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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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".
Contact details of provider:
Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA
Web page: http://fmwww.bc.edu/EC/
More information through EDIRC
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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Meese, Richard A & Rose, Andrew K, 1991.
"An Empirical Assessment of Non-linearities in Models of Exchange Rate Determination,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(3), pages 603-19, May.
- Richard A. Meese & Andrew K. Rose, 1989. "An empirical assessment of non-linearities in models of exchange rate determination," International Finance Discussion Papers 367, Board of Governors of the Federal Reserve System (U.S.).
- John Barkoulas & Christopher F. Baum, 1996.
"Fractional Differencing Modeling and Forecasting of Eurocurrency Deposit Rates,"
Boston College Working Papers in Economics
317., Boston College Department of Economics.
- Barkoulas, John T & Baum, Christopher F, 1997. "Fractional Differencing Modeling and Forecasting of Eurocurrency Deposit Rates," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 20(3), pages 355-72, Fall.
- Andrew W. Lo, 1989.
"Long-term Memory in Stock Market Prices,"
NBER Working Papers
2984, National Bureau of Economic Research, Inc.
- Francis X. Diebold & James M. Nason, 1989.
"Nonparametric exchange rate prediction?,"
Finance and Economics Discussion Series
81, Board of Governors of the Federal Reserve System (U.S.).
- Cheung, Yin-Wong, 1993. "Long Memory in Foreign-Exchange Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 93-101, January.
- Sowell, Fallaw, 1992. "Maximum likelihood estimation of stationary univariate fractionally integrated time series models," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 165-188.
- Engel, Charles & Hamilton, James D, 1990. "Long Swings in the Dollar: Are They in the Data and Do Markets Know It?," American Economic Review, American Economic Association, vol. 80(4), pages 689-713, September.
- Meese, Richard A & Rose, Andrew K, 1990. "Nonlinear, Nonparametric, Nonessential Exchange Rate Estimation," American Economic Review, American Economic Association, vol. 80(2), pages 192-96, May.
- Baillie, Richard T & Bollerslev, Tim, 1989. " Common Stochastic Trends in a System of Exchange Rates," Journal of Finance, American Finance Association, vol. 44(1), pages 167-81, March.
- Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
- Barkoulas, John T & Labys, Walter C & Onochie, Joseph I, 1999. "Long Memory In Futures Prices," The Financial Review, Eastern Finance Association, vol. 34(1), pages 91-100, February.
- Chung, Ching-Fan & Baillie, Richard T, 1993. "Small Sample Bias in Conditional Sum-of-Squares Estimators of Fractionally Integrated ARMA Models," Empirical Economics, Springer, vol. 18(4), pages 791-806.
- Kuan, Chung-Ming & Liu, Tung, 1995. "Forecasting Exchange Rates Using Feedforward and Recurrent Neural Networks," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(4), pages 347-64, Oct.-Dec..
- Kühl, Michael, 2008. "Strong comovements of exchange rates: Theoretical and empirical cases when currencies become the same asset," Center for European, Governance and Economic Development Research Discussion Papers 76, University of Goettingen, Department of Economics.
- Jin, Hyun J. & Elder, John & Koo, Won W., 2006.
"A reexamination of fractional integrating dynamics in foreign currency markets,"
International Review of Economics & Finance,
Elsevier, vol. 15(1), pages 120-135.
- Elder, John & Jin, Hyun Joung & Koo, Won W., 2004. "A Reexamination Of Fractional Integrating Dynamics In Foreign Currency Markets," 2004 Annual meeting, August 1-4, Denver, CO 20004, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F Baum).
If references are entirely missing, you can add them using this form.