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Episodic nonstationarity in exchange rates

Brooks, C. and Hinich, M. J. (1998) Episodic nonstationarity in exchange rates. Applied Economics Letters, 5 (11). pp. 719-722. ISSN 1466-4291

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To link to this item DOI: 10.1080/135048598354203

Abstract/Summary

We examine a method recently proposed by Hinich and Patterson (mimeo, University of Texas at Austin, 1995) for testing the validity of specifying a GARCH error structure for financial time series data in the context of a set of ten daily Sterling exchange rates. The results demonstrate that there are statistical structures present in the data that cannot be captured by a GARCH model, or any of its variants. This result has important implications for the interpretation of the recent voluminous literature which attempts to model financial asset returns using this family of models.

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > ICMA Centre
ID Code:35987
Publisher:Taylor & Francis

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