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Twice a day or continuously? Observation frequency and inference on foreign exchange volatility persistence

  • Michael Melvin
  • Bettina Peiers

This paper examines how observation frequency alters inference on cross-locational volatility dependencies in the foreign exchange market. When volatility proxies are based on tick-by-tick exchange rate quotes, this paper finds evidence of statistically significant own-region volatility persistence as well as symmetric interregional dependence. In addition, this paper detects strong day-of-the-week effects, with Mondays displaying the lowest volatility. These results differ from previous studies which based volatility estimates on only two daily observations per region. Copyright International Atlantic Economic Society 1998

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Article provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.

Volume (Year): 26 (1998)
Issue (Month): 1 (March)
Pages: 44-53

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Handle: RePEc:kap:atlecj:v:26:y:1998:i:1:p:44-53
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  1. Engle, Robert F & Ito, Takatoshi & Lin, Wen-Ling, 1990. "Meteor Showers or Heat Waves? Heteroskedastic Intra-daily Volatility in the Foreign Exchange Market," Econometrica, Econometric Society, vol. 58(3), pages 525-42, May.
  2. Takatoshi Ito & Robert F. Engle & Wen-Ling Lin, 1990. "Where Does the Meteor Shower Come From? The Role of Stochastic Policy Coordination," NBER Working Papers 3504, National Bureau of Economic Research, Inc.
  3. Dacorogna, Michael M. & Muller, Ulrich A. & Nagler, Robert J. & Olsen, Richard B. & Pictet, Olivier V., 1993. "A geographical model for the daily and weekly seasonal volatility in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 12(4), pages 413-438, August.
  4. Hogan, Kedreth Jr. & Melvin, Michael T., 1994. "Sources of meteor showers and heat waves in the foreign exchange market," Journal of International Economics, Elsevier, vol. 37(3-4), pages 239-247, November.
  5. Richard T. Baillie & Tim Bollerslev, 1991. "Intra-Day and Inter-Market Volatility in Foreign Exchange Rates," Review of Economic Studies, Oxford University Press, vol. 58(3), pages 565-585.
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