An investigation of long range dependence in intra-day foreign exchange rate volatility

Henry, Marc and Payne, Richard (1997) An investigation of long range dependence in intra-day foreign exchange rate volatility. Financial Markets Group Discussion Papers (264). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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Abstract

A comprehensive set of estimates of long memory in the volatility of three intra-day foreign exchange data series is presented. Robust semiparametric methods are used. Deseasonalizing procedures are proposed and permit the use of fully parametric methods which provide efficient tests of long memory. The hypothesis of long range dependence in the raw returns is rejected. In the volatility series, however, there is evidence of a long range dependent component, a finding which is significant and consistent across currencies. Furthermore, the hypothesis of I(1) volatility is strongly rejected in favour of a covariance stationary alternative, with evidence that previous findings of near-integrated volatility are due to the omission of long-range dependent components.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://www.fmg.ac.uk/
Additional Information:	© 1997 The Author(s)
Divisions:	Finance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
JEL classification:	F - International Economics > F3 - International Finance > F31 - Foreign Exchange F - International Economics > F3 - International Finance > F30 - General
Date Deposited:	30 Jun 2023 09:24
Last Modified:	16 Sep 2023 00:03
URI:	http://eprints.lse.ac.uk/id/eprint/119151

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