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Some stylized facts of returns in the foreign exchange and stock markets in Peru

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  • Humala, Alberto

    (Banco Central de Reserva del Perú)

  • Rodriguez, Gabriel

    (Pontificia Universidad Católica del Perú)

Abstract

Some stylized facts for foreign exchange and stock market returns are explored using statistical methods. Formal statistics for testing presence of autocorrelation, asymmetry, and other deviations from normality is applied to these financial returns. Dynamic correlations and different kernel estimations and approximations of the empirical distributions are also under scrutiny. Furthermore, dynamic analysis of mean, standard deviation, skewness and kurtosis are also performed to evaluate time-varying properties in return distributions. Main results reveal different sources and types of non-normality in the return distributions in both markets. Left fat tails, excess kurtosis, return clustering and unconditional time-varying moments show important deviations from normality. Identifiable volatility cycles in both forex and stock markets are associated to common macro financial uncertainty events.

Suggested Citation

  • Humala, Alberto & Rodriguez, Gabriel, 2010. "Some stylized facts of returns in the foreign exchange and stock markets in Peru," Working Papers 2010-017, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2010-017
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    Cited by:

    1. Dennis Alvaro & Ángel Guillén & Gabriel Rodríguez, 2017. "Modelling the volatility of commodities prices using a stochastic volatility model with random level shifts," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(1), pages 71-103, February.
    2. Zhen-Hua Yang & Jian-Guo Liu & Chang-Rui Yu & Jing-Ti Han, 2017. "Quantifying the effect of investors’ attention on stock market," PLOS ONE, Public Library of Science, vol. 12(5), pages 1-16, May.
    3. Gabriel Rodríguez, 2015. "Modeling Latin-American Stock Markets Volatility: Varying Probabilities and Mean Reversion in a Random Level Shifts Model," Documentos de Trabajo / Working Papers 2015-403, Departamento de Economía - Pontificia Universidad Católica del Perú.
    4. Ataurima Arellano, Miguel & Rodríguez, Gabriel, 2020. "Empirical modeling of high-income and emerging stock and Forex market return volatility using Markov-switching GARCH models," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    5. M. MALLIKARJUNA & R. Prabhakara RAO, 2019. "Volatility experience of major world stock markets," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(621), W), pages 35-52, Winter.
    6. Gabriel Rodríguez & Roxana Tramontana Tocto, 2015. "Application of a Short Memory Model With Random Level Shifts to the Volatility of Latin American Stock Market Returns," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 52(2), pages 185-211, November.
    7. Willy Alanya & Gabriel Rodríguez, 2019. "Asymmetries in Volatility: An Empirical Study for the Peruvian Stock and Forex Markets," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 22(01), pages 1-18, March.
    8. Willy Alanya & Gabriel Rodríguez, 2018. "Stochastic Volatility in the Peruvian Stock Market and Exchange Rate Returns: A Bayesian Approximation," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(3), pages 354-385, December.
    9. repec:agr:journl:v:4(621):y:2019:i:4(621):p:35-52 is not listed on IDEAS
    10. Gabriel Rodríguez, 2016. "Modeling Latin-American Stock and Forex Markets Volatility: Empirical Application of a Model with Random Level Shifts and Genuine Long Memory [Modelando la volatilidad de los mercados bursátiles y cam," Documentos de Trabajo / Working Papers 2016-416, Departamento de Economía - Pontificia Universidad Católica del Perú.
    11. Andrés Herrera Aramburú & Gabriel Rodríguez, 2016. "Volatility of stock market and exchange rate returns in Peru: Long memory or short memory with level shifts?," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 9(1), pages 45-66.
    12. Junior A. Ojeda Cunya & Gabriel Rodríguez, 2016. "An application of a random level shifts model to the volatility of Peruvian stock and exchange rate returns," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 9(1), pages 34-55, March.
    13. Ahmet Akca & Ethem Çanakoğlu, 2021. "Adaptive stochastic risk estimation of firm operating profit," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 48(3), pages 463-504, September.
    14. Andrés Felipe Galeano Zurbaran, 2018. "Distribuciones no normales para la selección de activos en el mercado Colombiano," Documentos de Trabajo 17208, Quantil.
    15. Renzo Pardo Figueroa & Gabriel Rodríguez, 2014. "Distinguishing between True and Spurious Long Memory in the Volatility of Stock Market Returns in Latin America," Documentos de Trabajo / Working Papers 2014-395, Departamento de Economía - Pontificia Universidad Católica del Perú.
    16. Patricia Lengua Lafosse & Cristian Bayes & Gabriel Rodríguez, 2015. "A Stochastic Volatility Model with GH Skew Student’s t-Distribution: Application to Latin-American Stock Returns," Documentos de Trabajo / Working Papers 2015-405, Departamento de Economía - Pontificia Universidad Católica del Perú.
    17. Gabriel Rodríguez & José Carlos Gonzáles Tanaka, 2016. "An Empirical Application of a Random Level Shifts Model with Time-Varying Probability and Mean Reversion to the Volatility of Latin-American Forex Markets Returns [Una aplicación empírica de un modelo," Documentos de Trabajo / Working Papers 2016-415, Departamento de Economía - Pontificia Universidad Católica del Perú.
    18. Lengua Lafosse, Patricia & Rodríguez, Gabriel, 2018. "An empirical application of a stochastic volatility model with GH skew Student's t-distribution to the volatility of Latin-American stock returns," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 155-173.
    19. Alfredo Calderon Vela & Gabriel Rodríguez, 2014. "Extreme Value Theory: An Application to the Peruvian Stock Market Returns," Documentos de Trabajo / Working Papers 2014-394, Departamento de Economía - Pontificia Universidad Católica del Perú.
    20. Xin Yang & Shigang Wen & Zhifeng Liu & Cai Li & Chuangxia Huang, 2019. "Dynamic Properties of Foreign Exchange Complex Network," Mathematics, MDPI, vol. 7(9), pages 1-19, September.

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    More about this item

    Keywords

    Non-Normal Distributions; Stock Market Returns; Foreign Exchange Market Returns.;
    All these keywords.

    JEL classification:

    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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