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

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  • Michael Melvin
  • Bettina Peiers

Abstract

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

Suggested Citation

  • Michael Melvin & Bettina Peiers, 1998. "Twice a day or continuously? Observation frequency and inference on foreign exchange volatility persistence," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 26(1), pages 44-53, March.
  • Handle: RePEc:kap:atlecj:v:26:y:1998:i:1:p:44-53
    DOI: 10.1007/BF02298370
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    References listed on IDEAS

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    1. Ito, Takatoshi & Engle, Robert F. & Lin, Wen-Ling, 1992. "Where does the meteor shower come from? : The role of stochastic policy coordination," Journal of International Economics, Elsevier, vol. 32(3-4), pages 221-240, May.
    2. 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.
    3. 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.
    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. 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 525-542, May.
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    Cited by:

    1. Andreas Fischer, 2003. "Reuters News Reports versus Official Interventions: A Cautionary Warning," Working Papers 03.06, Swiss National Bank, Study Center Gerzensee.
    2. Ibrahim Chowdhury & Lucio Sarno, 2004. "Time-Varying Volatility in the Foreign Exchange Market: New Evidence on its Persistence and on Currency Spillovers," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(5-6), pages 759-793.

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