High Frequency Deutsche Mark-US Dollar Returns: FIGARCH Representations and Non Linearities

21 Pages Posted: 8 Jul 2015

See all articles by Richard Baillie

Richard Baillie

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management

Aydin Cecen

Central Michigan University

Young Wook Han

Hallym University

Date Written: July 7, 2015

Abstract

This article considers the use of the long memory volatility process, FIGARCH, in representing Deutschemark-US dollar spot exchange rate returns for both high and low frequency returns data. The FIGARCH model is found to be the preferred specification for both high frequency and daily returns data, with similar values of the long memory volatility parameter across frequencies, which is indicative of returns being generated by a self similar process. The BDS test for non-linearity is applied to the residuals of the model for the high frequency returns. No evidence is found to suggest that the procedure for filtering the high frequency returns to remove the intraday periodicity has induced any non-linearities in the residuals; and the FIGARCH specification is found to be adequate.

Keywords: BDS test, correlation dimension, FIGARCH, high frequency data, intra day periodicity, volatility

JEL Classification: C22, F31

Suggested Citation

Baillie, Richard and Cecen, Aydin and Han, Young Wook, High Frequency Deutsche Mark-US Dollar Returns: FIGARCH Representations and Non Linearities (July 7, 2015). Multinational Finance Journal, Vol. 4, No. 3/4, p. 247-267, 2000, Available at SSRN: https://ssrn.com/abstract=2627658

Richard Baillie (Contact Author)

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management ( email )

East Lansing, MI 48824-1121
United States

Aydin Cecen

Central Michigan University ( email )

Mt. Pleasant, MI 48858
United States

Young Wook Han

Hallym University ( email )

Chunchon Kangwon, 200-702
82-33-248-1820 (Phone)
82-33-256-3424 (Fax)

HOME PAGE: www.hallym.ac.kr

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