Advanced Search
MyIDEAS: Login to save this paper or follow this series

Long Memory and Fractional Integration in High Frequency Data on the US Dollar / British Pound Spot Exchange Rate

Contents:

Author Info

  • Guglielmo Maria Caporale
  • Luis A. Gil-Alana

Abstract

This paper analyses the long-memory properties of a high-frequency financial time series dataset. It focuses on temporal aggregation and other features of the data, and how they might affect the degree of dependence of the series. Fractional integration or I(d) models are estimated with a variety of specifications for the error term. In brief, we find evidence that a lower degree of integration is associated with lower data frequencies. In particular, when the data are collected every 10 minutes there are several cases with values of d strictly smaller than 1, implying mean-reverting behaviour; however, for higher data frequencies the unit root null cannot be rejected. This holds for all four series examined, namely Open, High, Low and Last observations for the US dollar / British pound spot exchange rate and for different sample periods.

Download Info

If 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.
File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-04/cesifo1_wp4224.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4224.

as in new window
Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:ces:ceswps:_4224

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo.de
More information through EDIRC

Related research

Keywords: high frequency data; long memory; volatility persistence; structural breaks;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. John Cotter, 2011. "Uncovering Long Memory in High Frequency UK Futures," Working Papers, Geary Institute, University College Dublin 200414, Geary Institute, University College Dublin.
  2. Souza, Leonardo Rocha, 2003. "Temporal Aggregation and Bandwidth Selection in Estimating Long Memory," Economics Working Papers (Ensaios Economicos da EPGE) 478, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  3. Abadir, Karim M. & Distaso, Walter & Giraitis, Liudas, 2007. "Nonstationarity-extended local Whittle estimation," Journal of Econometrics, Elsevier, Elsevier, vol. 141(2), pages 1353-1384, December.
  4. Uwe Hassler, 2011. "Estimation of fractional integration under temporal aggregation," Post-Print, HAL peer-00815563, HAL.
  5. Andrew W. Lo, 1989. "Long-term Memory in Stock Market Prices," NBER Working Papers 2984, National Bureau of Economic Research, Inc.
  6. Ignacio N. Lobato & Carlos Velasco, 2005. "Efficient Wald Tests For Fractional Unit Roots," Economics Working Papers we056935, Universidad Carlos III, Departamento de Economía.
  7. Lobato, I.N. & Savin, N.E., 1996. "Real and Spurious Long Memory Properties of Stock Market Data," Working Papers, University of Iowa, Department of Economics 96-07, University of Iowa, Department of Economics.
  8. Granger, Clive W. J. & Ding, Zhuanxin, 1996. "Varieties of long memory models," Journal of Econometrics, Elsevier, Elsevier, vol. 73(1), pages 61-77, July.
  9. Gilles DUFRENOT & Laurent MATHIEU & Val=E9rie MIGNON & Anne PEGUIN-FEISSOLE, 2003. "Persistent misalignments of the European exchanges rates: some evidence from nonlinear cointegration," International Finance, EconWPA 0309003, EconWPA.
  10. Lobato, Ignacio N & Savin, N E, 1998. "Real and Spurious Long-Memory Properties of Stock-Market Data: Reply," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 16(3), pages 280-83, July.
  11. Summers, Lawrence H, 1986. " Does the Stock Market Rationally Reflect Fundamental Values?," Journal of Finance, American Finance Association, American Finance Association, vol. 41(3), pages 591-601, July.
  12. Leonardo Rocha Souza, 2005. "A Note On Chambers'S "Long Memory And Aggregation In Macroeconomic Time Series"," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 1059-1062, 08.
  13. Ohanissian, Arek & Russell, Jeffrey R. & Tsay, Ruey S., 2008. "True or Spurious Long Memory? A New Test," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 26, pages 161-175, April.
  14. Sibbertsen, Philipp, 2001. "Long-memory in volatilities of German stock returns," Technical Reports, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen 2001,42, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
  15. Dufrénot, Gilles & Lardic, Sandrine & Mathieu, Laurent & Mignon, Valérie & Péguin-Feissolle, Anne, 2008. "Explaining the European exchange rates deviations: Long memory or non-linear adjustment?," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 18(3), pages 207-215, July.
  16. Souza, Leonardo R. & Smith, Jeremy, 2002. "Bias in the memory parameter for different sampling rates," International Journal of Forecasting, Elsevier, Elsevier, vol. 18(2), pages 299-313.
  17. Marcel Aloy & Mohamed Boutahar & Karine Gente & Anne Peguin-Feissolle, 2011. "Purchasing power parity and the long memory properties of real exchange rates: does one size fit all?," Working Papers, HAL halshs-00559170, HAL.
  18. Demetrescu, Matei & Kuzin, Vladimir & Hassler, Uwe, 2008. "Long Memory Testing In The Time Domain," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 24(01), pages 176-215, February.
  19. Christopher F. Baum & John T. Barkoulas & Mustafa Caglayan, 1999. "Persistence in International Inflation Rates," Southern Economic Journal, Southern Economic Association, Southern Economic Association, vol. 65(4), pages 900-913, April.
  20. Granger, C. W. J., 1980. "Long memory relationships and the aggregation of dynamic models," Journal of Econometrics, Elsevier, Elsevier, vol. 14(2), pages 227-238, October.
  21. Wang, Changyun, 2004. "Futures trading activity and predictable foreign exchange market movements," Journal of Banking & Finance, Elsevier, Elsevier, vol. 28(5), pages 1023-1041, May.
  22. Cheung, Yin-Wong, 1993. "Long Memory in Foreign-Exchange Rates," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 11(1), pages 93-101, January.
  23. Caporale, Guglielmo Maria & Gil-Alana, Luis A., 2002. "Fractional integration and mean reversion in stock prices," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 42(3), pages 599-609.
  24. Gil-Alana, L. A. & Robinson, P. M., 1997. "Testing of unit root and other nonstationary hypotheses in macroeconomic time series," Journal of Econometrics, Elsevier, Elsevier, vol. 80(2), pages 241-268, October.
  25. Leonardo Rocha Souza, 2008. "Why Aggregate Long Memory Time Series?," Econometric Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 27(1-3), pages 298-316.
  26. Gil-Alana, Luis A., 2000. "Mean reversion in the real exchange rates," Economics Letters, Elsevier, Elsevier, vol. 69(3), pages 285-288, December.
  27. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, American Finance Association, vol. 25(2), pages 383-417, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Slim Chaouachi & Zied Ftiti & Frederic Teulon, 2014. "Explaining the Tunisian Real Exchange: Long Memory versus Structural Breaks," Working Papers, Department of Research, Ipag Business School 2014-147, Department of Research, Ipag Business School.
  2. Mensi, Walid & Hammoudeh, Shawkat & Yoon, Seong-Min, 2014. "Structural breaks and long memory in modeling and forecasting volatility of foreign exchange markets of oil exporters: The importance of scheduled and unscheduled news announcements," International Review of Economics & Finance, Elsevier, Elsevier, vol. 30(C), pages 101-119.
  3. Slim Chaouachi & Zied Ftiti & Frédèric Teulon, 2014. "Modelling the Real Exchange Rate: A new Sequential Approach," Working Papers, Department of Research, Ipag Business School 2014-390, Department of Research, Ipag Business School.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4224. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.