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A reexamination of fractional integrating dynamics in foreign currency markets

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  • Jin, Hyun J.
  • Elder, John
  • Koo, Won W.

Abstract

This paper reexamines foreign currency markets for evidence of fractional integration, and extends the extant literature in several important dimensions. First, we utilize a new semiparametric wavelet-based estimator, which is far superior to the more prevalent GPH estimator on the basis of mean squared error. Second, we utilize a broader and longer sample, which better facilitates the detection of long memory dynamics. Our analysis yields interesting empirical results that contrast with other recent studies. In particular, we find new evidence that a large proportion (fourteen out of nineteen) of exchange rate series display evidence of long memory, with little variation over alternative sample periods.
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  • 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.
  • Handle: RePEc:eee:reveco:v:15:y:2006:i:1:p:120-135
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    Cited by:

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    2. Aouad Hadjer, Soumia & Taouli, Mustapha Kamel & Benbouziane, Mohamed, 2012. "Modélisation du Comportement du Taux de Change du Dinar Algérien: Une Investigation Empirique par la Méthode ARFIMA [Modeling of the Algerian Dinar Exchange Rate: An empirical investigation using t," MPRA Paper 38605, University Library of Munich, Germany.
    3. P. Sephton, 2008. "Exchange rates and fractional integration revisited," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 4(6), pages 383-387.
    4. Michael KUEHL, 2008. "Strong Comovements of Exchange Rates: Theoretical and Empirical Cases when Currencies Become the Same Asset," EcoMod2008 23800071, EcoMod.
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    6. Aktham Maghyereh, 2007. "Testing for long-range dependence in stock market returns: a further evidence from MENA emerging stock markets," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 3(6), pages 365-371.
    7. Sensoy, Ahmet & Tabak, Benjamin M., 2016. "Dynamic efficiency of stock markets and exchange rates," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 353-371.
    8. In, Francis & Kim, Sangbae, 2006. "Multiscale hedge ratio between the Australian stock and futures markets: Evidence from wavelet analysis," Journal of Multinational Financial Management, Elsevier, vol. 16(4), pages 411-423, October.
    9. Shahzad, Syed Jawad Hussain & Hernandez, Jose Areola & Hanif, Waqas & Kayani, Ghulam Mujtaba, 2018. "Intraday return inefficiency and long memory in the volatilities of forex markets and the role of trading volume," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 506(C), pages 433-450.
    10. Mejra Festic & Alenka Kavkler & Silvo Dajcman, 2012. "Long memory in the Croatian and Hungarian stock market returns," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 30(1), pages 115-139.
    11. Fredrik Andersson, 2014. "Exchange rates dynamics revisited: a panel data test of the fractional integration order," Empirical Economics, Springer, vol. 47(2), pages 389-409, September.
    12. Jin, Hyun Joung, 2008. "A Long Memory Conditional Variance Model for International Grain Markets," Journal of Rural Development/Nongchon-Gyeongje, Korea Rural Economic Institute, vol. 31(2), pages 1-23, May.

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