Asymmetric Linkages between High-Frequency Dem/USD and GBP/USD Exchange Rates

42 Pages Posted: 28 Nov 2007

See all articles by Long Chen

Long Chen

City University London - Sir John Cass Business School

Kate Phylaktis

City University London - Sir John Cass Business School

Abstract

This paper investigates whether global imbalance in the size of the exchange rates order flow introduces asymmetric linkages. In particular, we study the high frequency volatility spillover between DEM/USD and GBP/USD using multivariate GARCH models over a two-year sample period of 1997 to 1998. The results show significant volatility spillover effects from DEM/USD to GBP/USD, while the feedback from the GBP/USD to DEM/USD is relatively small. We hypothesize that the different sizes of global order flow generated by these two exchange rates may be a major factor that contributes to such asymmetric linkages.

Keywords: Exchange rate volatility linkages, High Frequency data, Exchange rates

JEL Classification: F31

Suggested Citation

Chen, Long and Phylaktis, Kate, Asymmetric Linkages between High-Frequency Dem/USD and GBP/USD Exchange Rates. Available at SSRN: https://ssrn.com/abstract=1032956 or http://dx.doi.org/10.2139/ssrn.1032956

Long Chen

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Kate Phylaktis (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 70408735 (Phone)
+44 20 70408881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/k.phylaktis/

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