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Nonlinearities in the exchange rates returns and volatility

Author

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  • Dı́az, Andrés Fernández
  • Grau-Carles, Pilar
  • Mangas, Lorenzo Escot

Abstract

Recent findings of nonlinearities in financial assets can be the product of contamination produced by shifts in the distribution of the data. Using the BDS and Kaplan tests it is shown that, some of the nonlinearities found in foreign exchange rate returns, can be the product of shifts in variance while other do not. Also, the behavior of the volatility is studied, showing that the ARFIMA modeling is able to capture long memory, but, depending on the proxy used for the volatility, is not always able to capture all the nonlinearities of the data

Suggested Citation

  • Dı́az, Andrés Fernández & Grau-Carles, Pilar & Mangas, Lorenzo Escot, 2002. "Nonlinearities in the exchange rates returns and volatility," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 316(1), pages 469-482.
    • Handle: RePEc:eee:phsmap:v:316:y:2002:i:1:p:469-482
    DOI: 10.1016/S0378-4371(02)01203-7
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    Citations

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    Cited by:

    1. Evzen Kocenda & Lubos Briatka, 2004. "Advancing the iid Test Based on Integration across the Correlation Integral: Ranges, Competition, and Power," CERGE-EI Working Papers wp235, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    2. Katarzyna Czech & Łukasz Pietrych, 2021. "The Efficiency of the Polish Zloty Exchange Rate Market: The Uncovered Interest Parity and Fractal Analysis Approaches," Risks, MDPI, vol. 9(8), pages 1-17, August.
    3. Lorenzo Escot & Julio E. Sandubete & Łukasz Pietrych, 2023. "Detecting Structural Changes in Time Series by Using the BDS Test Recursively: An Application to COVID-19 Effects on International Stock Markets," Mathematics, MDPI, vol. 11(23), pages 1-18, December.
    4. Burns, Kelly & Moosa, Imad A., 2015. "Enhancing the forecasting power of exchange rate models by introducing nonlinearity: Does it work?," Economic Modelling, Elsevier, vol. 50(C), pages 27-39.
    5. Evzen Kocenda & Lubos Briatka, 2005. "Optimal Range for the iid Test Based on Integration Across the Correlation Integral," Econometric Reviews, Taylor & Francis Journals, vol. 24(3), pages 265-296.
    6. Claudeci Da Silva & Hugo Agudelo Murillo & Joaquim Miguel Couto, 2014. "Early Warning Systems: Análise De Ummodelo Probit De Contágio De Crise Dos Estados Unidos Para O Brasil(2000-2010)," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 110, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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