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Fractional Differencing Modeling and Forecasting of Eurocurrency Deposit Rates

  • Barkoulas, John T
  • Baum, Christopher F

Using the spectral regression method, we test for long-term stochastic memory in three- and six-month daily returns series of Eurocurrency deposits denominated in major currencies. Significant evidence of positive long-term dependence is found in several Eurocurrency returns series. Compared with benchmark linear models, the estimate fractional models result in dramatic out-of-sample forecasting improvements over longer horizons for the Eurocurrency deposits denominated in German marks, Swiss francs, and Japanese yen.

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Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

Volume (Year): 20 (1997)
Issue (Month): 3 (Fall)
Pages: 355-72

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Handle: RePEc:bla:jfnres:v:20:y:1997:i:3:p:355-72
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  1. 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.
  2. Ray, Bonnie K., 1993. "Long-range forecasting of IBM product revenues using a seasonal fractionally differenced ARMA model," International Journal of Forecasting, Elsevier, vol. 9(2), pages 255-269, August.
  3. Greene, Myron T. & Fielitz, Bruce D., 1977. "Long-term dependence in common stock returns," Journal of Financial Economics, Elsevier, vol. 4(3), pages 339-349, May.
  4. Andrew W. Lo, 1989. "Long-term Memory in Stock Market Prices," NBER Working Papers 2984, National Bureau of Economic Research, Inc.
  5. 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.
  6. Barkoulas, John T. & Baum, Christopher F., 1996. "Long-term dependence in stock returns," Economics Letters, Elsevier, vol. 53(3), pages 253-259, December.
  7. 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.
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