Episodic nonstationarity in exchange rates

Brooks, C. ORCID: https://orcid.org/0000-0002-2668-1153 and Hinich, M. J. (1998) Episodic nonstationarity in exchange rates. Applied Economics Letters, 5 (11). pp. 719-722. ISSN 1466-4291 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
URI	https://reading-clone.eprints-hosting.org/id/eprint/35987
Identification Number/DOI	10.1080/135048598354203
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Taylor & Francis
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