Meteor Showers or Heat Waves? Heteroskedastic Intra-Daily Volatility in the Foreign Exchange Market

Loading...
Thumbnail Image

View/Download File

Persistent link to this item

Statistics
View Statistics

Journal Title

Journal ISSN

Volume Title

Title

Meteor Showers or Heat Waves? Heteroskedastic Intra-Daily Volatility in the Foreign Exchange Market

Published Date

1988-04

Publisher

Center for Economic Research, Department of Economics, University of Minnesota

Type

Working Paper

Abstract

This paper defines and tests a form of market efficiency called market dexterity which requires that asset prices adjust instantaneously and completely in response to new information. Examining the behavior of the yen/dollar exchange rate while each of the major markets are open it is possible to test for informational effects from one market to the next. Assuming that news has only country specific autocorrelation such as a heat wave. any intra-daily volatility spillovers (meteor showers) become evidence against market dexterity. ARCH models are employed to model heteroskedasticity across intra-daily market segments. Statistical tests lead to the rejection of the heat wave and therefore the market dexterity hypothesis. Using a volatility type of vector autoregression we examine the impact of news in one market on the time path of volatility in other markets.

Keywords

Description

Related to

Replaces

License

Series/Report Number

Funding information

Isbn identifier

Doi identifier

Previously Published Citation

Engle, R.F., Ito, T. and Lin, W., (1988), "Meteor Showers or Heat Waves? Heteroskedastic Intra-Daily Volatility in the Foreign Exchange Market", Discussion Paper No. 246, Center for Economic Research, Department of Economics, University of Minnesota.

Suggested citation

Engle, Robert F.; Ito, Takatoshi; Lin, Wen-Ling. (1988). Meteor Showers or Heat Waves? Heteroskedastic Intra-Daily Volatility in the Foreign Exchange Market. Retrieved from the University Digital Conservancy, https://hdl.handle.net/11299/55524.

Content distributed via the University Digital Conservancy may be subject to additional license and use restrictions applied by the depositor. By using these files, users agree to the Terms of Use. Materials in the UDC may contain content that is disturbing and/or harmful. For more information, please see our statement on harmful content in digital repositories.