Common Volatility across Latin American Foreign Exchange Markets
AbstractThis paper uses high frequency exchange rate data for a group of twelve Latin American countries to analyze volatility comovements. Particular interest is posed on understanding the existence of a common volatility process during the 1994–2005 period. The analysis relies on bivariate common factor models. We test for second-order common features using the common ARCH-feature methodology developed by Engle and Kozicki (1993). Overall, the results of this paper indicate that while most currencies display evidence of time-varying variance, the volatility movements in the Latin American foreign exchange markets seems to be mainly country specific. Only a few markets show evidence of a common volatility process.
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Bibliographic InfoPaper provided by Sam Houston State University, Department of Economics and International Business in its series Working Papers with number 0702.
Date of creation: Mar 2007
Date of revision:
Other versions of this item:
- Isabel Ruiz, 2009. "Common volatility across Latin American foreign exchange markets," Applied Financial Economics, Taylor and Francis Journals, vol. 19(15), pages 1197-1211.
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- Arturo Lorenzo-Valdés & Antonio Ruiz-Porras, 2012. "Los rendimientos cambiarios latinoamericanos y la (a)simetría de los shocks informacionales: un análisis econométrico," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 87-113, November.
- Hecq Alain & Laurent Sébastien & Palm Franz C., 2012. "On the Univariate Representation of BEKK Models with Common Factors," Research Memoranda 018, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
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