Evidence of long memory and asymmetry in the EUR/PLN exchange rate volatility / Empiryczna analiza długiej pamięci procesu i asymetrii zmienności kursu wymiany walut EUR/PLN

Klein, Tony; Thu, Hien Pham; Walther, Thomas

doi:10.15611/pn.2016.428.11

Cited by 1 publication

(2 citation statements)

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“…We find a high persistence of shocks in variance in GARCH, yielding covariance-nonstationary pro- For EUR/PLN, we observe an IGARCH effect in GARCH (α + β = 0.9956), yet the fractional differencing parameter d in FIGARCH is 0.4278. These findings correspond to earlier results of Klein et al (2016). Moreover, parameter estimates differ little across the FIGARCH variants.…”

Section: Parameter Estimationssupporting

confidence: 91%

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True or spurious long memory in European non-EMU currencies

Walther

Klein

Thu

et al. 2017

Research in International Business and Finance

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We examine the Croatian Kuna, the Czech Koruna, the Hungarian Forint, the Polish Z loty, the Romanian Leu, and the Swedish Krona whether their Euro exchange rates volatility exhibits true or spurious long memory. Recent research reveals long memory in foreign exchange rate volatility and we confirm this finding for these currency pairs by examining the long memory behavior of squared residuals by means of the V/S test. However, by using the ICSS approach we also find structural breaks in the unconditional variance. Literature suggests that structural breaks might lead to spurious long memory behavior. In a refined test strategy, we distinguish true from spurious long memory for the six exchange rates. Our findings suggest that Czech Koruna and Hungarian Forint only feature spurious long memory, while the rest of the series have both structural breaks and true long memory. Lastly, we demonstrate how to extend existing models to jointly model both properties yielding superior fit and better Value-at-Risk forecasts. The results of our work help to avoid misspecification and provide a better understanding of the properties of the foreign exchange rate volatility.

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Section: Parameter Estimationssupporting

confidence: 91%

“…Horobet et al (2016) use a Hodrick-Prescott filter to examine volatility for Croatia, Czech Republic, Hungary, Poland, Romania, Russia, Serbia, and Turkey. Klein et al (2016) show that long memory can be found in the variance of the Polish Z loty against the Euro.…”

Section: Introductionmentioning

confidence: 88%