Details
| Original language | English |
|---|---|
| Pages (from-to) | 789-811 |
| Number of pages | 23 |
| Journal | Open economies review |
| Volume | 34 |
| Issue number | 4 |
| Early online date | 26 Sept 2022 |
| Publication status | Published - Sept 2023 |
Abstract
This study considers the long memory and fractional integration in the range-based volatilities across 30 currencies against USD. Graphical analysis of the autocorrelation function at long lags and pole near zero frequencies in the periodogram suggests the existence of fractional integration. We apply semi-parametric methods to measure long-range dependence. We find a decrease in the memory estimates with an increase in the bandwidth, which indicates the presence of spurious memory rather true long memory. The hypothesis of long memory against the alternative of spurious memory is also tested by applying the different semi-parametric methods. Empirical results confirm the presence of spurious memory that may be a result of some shocks to the volatility estimator. Furthermore, the reduced memory estimates obtained by utilising an estimator accounting for level shifts also explains the inconsistency of the Local Whittle estimator. We also estimate the number of breaks for each series.
Keywords
- Exchange rate, Fractional integration, Level shifts, Long memory, Structural breaks, Volatility
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Open economies review, Vol. 34, No. 4, 09.2023, p. 789-811.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Long Memory, Spurious Memory
T2 - Persistence in Range-Based Volatility of Exchange Rates
AU - Afzal, Alia
AU - Sibbertsen, Philipp
N1 - Funding Information: The authors are grateful for the comments and suggestions of two anonymous referees which clearly improved the paper.
PY - 2023/9
Y1 - 2023/9
N2 - This study considers the long memory and fractional integration in the range-based volatilities across 30 currencies against USD. Graphical analysis of the autocorrelation function at long lags and pole near zero frequencies in the periodogram suggests the existence of fractional integration. We apply semi-parametric methods to measure long-range dependence. We find a decrease in the memory estimates with an increase in the bandwidth, which indicates the presence of spurious memory rather true long memory. The hypothesis of long memory against the alternative of spurious memory is also tested by applying the different semi-parametric methods. Empirical results confirm the presence of spurious memory that may be a result of some shocks to the volatility estimator. Furthermore, the reduced memory estimates obtained by utilising an estimator accounting for level shifts also explains the inconsistency of the Local Whittle estimator. We also estimate the number of breaks for each series.
AB - This study considers the long memory and fractional integration in the range-based volatilities across 30 currencies against USD. Graphical analysis of the autocorrelation function at long lags and pole near zero frequencies in the periodogram suggests the existence of fractional integration. We apply semi-parametric methods to measure long-range dependence. We find a decrease in the memory estimates with an increase in the bandwidth, which indicates the presence of spurious memory rather true long memory. The hypothesis of long memory against the alternative of spurious memory is also tested by applying the different semi-parametric methods. Empirical results confirm the presence of spurious memory that may be a result of some shocks to the volatility estimator. Furthermore, the reduced memory estimates obtained by utilising an estimator accounting for level shifts also explains the inconsistency of the Local Whittle estimator. We also estimate the number of breaks for each series.
KW - Exchange rate
KW - Fractional integration
KW - Level shifts
KW - Long memory
KW - Structural breaks
KW - Volatility
UR - http://www.scopus.com/inward/record.url?scp=85138806479&partnerID=8YFLogxK
U2 - 10.1007/s11079-022-09686-2
DO - 10.1007/s11079-022-09686-2
M3 - Article
AN - SCOPUS:85138806479
VL - 34
SP - 789
EP - 811
JO - Open economies review
JF - Open economies review
SN - 0923-7992
IS - 4
ER -