Higher Moments and Exchange Rate Behavior

Khademalomoom, Siroos; Narayan, Paresh Kumar; Sharma, Susan Sunila

doi:10.1111/fire.12171

Cited by 16 publications

(10 citation statements)

References 71 publications

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“…Recent studies such as Khademalomoom et al (2019), Ahmed and Al Mafrachi (2021) and Cui et al (2022) deal with the first six moments. Accordingly, the first six cumulants κ l ðY Þ are described in the second column of Table 2.…”

Section: Jdqsmentioning

confidence: 99%

Geometric and arithmetic realized comoments

Bae

2022

JDQS

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The author investigates realized comoments that overcome the drawback of conventional ones and derive the following findings. First, the author proves that (even generalized) geometric implied lower-order comoments yield neither geometric realized third comoment nor fourth moment. This is in contrast to previous studies that produce geometric realized third moment and arithmetic realized higher-order moments through lower-order implied moments. Second, arithmetic realized joint cumulants are obtained through complete Bell polynomials of lower-order joint cumulants. This study’s realized measures are unbiased estimators and they can, therefore, overcome the drawbacks of conventional realized measures.

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Section: Jdqsmentioning

confidence: 99%

Geometric and arithmetic realized comoments

Bae

2022

JDQS

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“…Conrad et al (2013) provide additional evidence that the relation between idiosyncratic skewness and subsequent returns persists even after controlling for differences in covariance, coskewness, and cokurtosis. Khademalomoom et al (2019) propose a higher moments GARCH model to study the out-of-sample predictability for exchange rates during the period 2004-2014. In addition, the authors consider the fifth and sixth higher moments, i.e.…”

Section: Related Literaturementioning

confidence: 99%

“…Amaya et al (2015) verify with the use of Monte Carlo simulations that the measurement of the realized higher moments is reliable in finite samples and that it is robust to the presence of market microstructure noise as well as to quote discontinuities. 5 Apart from the third moment (skewness) and the fourth moment (kurtosis), Khademalomoom et al (2019) discuss the usage of so-called hyper moments, which provide additional information to the aforementioned moments. For robustness, we also consider these moments as potential predictors of sovereign bond returns.…”

Section: Realized Higher Momentsmentioning

confidence: 99%

“…Realized hyper-skewness (fifth moment) accounts for asymmetric sensi-tivity of realized kurtosis (Khademalomoom et al, 2019):…”

Section: Realized Higher Momentsmentioning

confidence: 99%

“…Realized hyper-kurtosis (sixth moment) evaluates the tails and peakedness relative to the Gaussian distribution (Khademalomoom et al, 2019):…”

Section: Realized Higher Momentsmentioning

confidence: 99%

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Sovereign bond return prediction with realized higher moments

Kinateder

Papavassiliou

2019

Journal of International Financial Markets, Institutions and Mo

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This paper analyzes whether realized higher moments are able to predict out-ofsample sovereign bond returns using high-frequency data from the European bond market. We study bond return predictability over tranquil and crisis periods and across core and periphery markets at the index and country level. We provide fresh evidence that realized kurtosis is the dominant predictor of subsequent returns among higher moments and other predictors such as CDS spreads, short-term interest rates and implied stock market volatility. Our findings further underline that sovereign bond return predictability is stronger during crisis periods and more pronounced for bonds of lower credit ratings.

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A model sufficiency test using permutation entropy

Huang

Shang

Pitt

2022

Journal of Forecasting

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Using the ordinal-pattern concept in permutation entropy, we propose a model sufficiency test to study a given model's point prediction accuracy. Compared with some classical model sufficiency tests, such as Broock et al.'s (1996) test, our proposal does not require a sufficient model to eliminate all structures exhibited in the estimated residuals. When the innovations in the investigated data's underlying dynamics show a certain structure, such as higher moment serial dependence, Broock et al.'s (1996) test can lead to erroneous conclusions about the sufficiency of point predictors. Due to the structured innovations, inconsistency between the model sufficiency tests and prediction accuracy criteria can occur. Our proposal fills in this incoherence between model and prediction evaluation approaches and remains valid when the underlying process has nonwhite additive innovation.

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Higher Moments and Exchange Rate Behavior

Cited by 16 publications

References 71 publications

Geometric and arithmetic realized comoments

Geometric and arithmetic realized comoments

Sovereign bond return prediction with realized higher moments

A model sufficiency test using permutation entropy

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