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- Title
Intra-Day and Inter-Market Volatility in Foreign Exchange Rates.
- Authors
Baillie, Richard T.; Bollerslev, Tim
- Abstract
The hourly data on four major exchange rates recorded continuously on different world markets appears largely consistent with the efficient markets hypothesis, so that the logarithmic first differences are well approximated by a first-order moving-average process, with a small but significantly negative MA(1) coefficient, possibly induced by the time-averaging and non-synchroneity of the bid rates. The first differences in the logarithms of the exchange rates also have remarkably similar patterns of volatility over the different hours of the day. For each exchange rate, the volatility appears to be highly serially correlated, and well represented by a seasonal GARCH model with hourly dummy variables. This is in accord with the so-called meteor shower hypothesis, whereby news is transmitted through time and different market locations. The presence of seasonal ARCH term also suggest some heat wave, or market-specific news characteristics.
- Subjects
FOREIGN exchange; FOREIGN exchange rates; FINANCIAL markets; MARKET volatility; MARKETS; INTERNATIONAL finance
- Publication
Review of Economic Studies, 1991, Vol 58, Issue 3, p565
- ISSN
0034-6527
- Publication type
Article
- DOI
10.2307/2298012