Unveiling Non-Linearities Through Time Scale Transformations
Posted: 23 Aug 1998
In this paper, we show that intra-daily foreign exchange rate returns exhibit even stronger nonlinearities than daily or weekly returns. These nonlinearities result from the intra-daily seasonality and the presence of market participants with different time-horizons. Moreover, we present some evidence that both these nonlinearities and the auto-correlation patterns of the volatility can successfully be accounted for by successive time scale transformations.
JEL Classification: F31
Suggested Citation: Suggested Citation