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Heterogeneous Behavior and Volatility Transmission in the Forex Market using High-Frequency Data

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  • Rim Ammar Lamouchi
  • Ruba Khalid Shira

Abstract

This paper examines the dynamics of volatility transmission in the forex market using high-frequency data for five exchange rates (EUR/USD, EUR/JPY, EUR/CHF, EUR/GBP and EUR/AUD) from January 2004 to October 2014. We apply a multivariate HAR model in which the daily realized volatility of a given exchange rate depends on both its own lags and the lagged realized volatilities of the other exchange rates. Furthermore, this model is able to identify short-term, medium-term, and long-term transmission effects. We also find evidence of statistically significant volatility transmission between exchange rates in the forex market, especially during periods marked by market uncertainty. Â JEL classification numbers: C5, F31, G15.

Suggested Citation

  • Rim Ammar Lamouchi & Ruba Khalid Shira, 2023. "Heterogeneous Behavior and Volatility Transmission in the Forex Market using High-Frequency Data," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 13(3), pages 1-3.
    • Handle: RePEc:spt:apfiba:v:13:y:2023:i:3:f:13_3_3
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    More about this item

    Keywords

    Foreign exchange markets; Realized volatility; High-frequency data; Volatility transmission; HAR model; DCC-GARCH.;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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