High Frequency Financial Econometrics: Recent Developments by Luc Bauwens, Winfried Pohlmeier, David Veredas

By Luc Bauwens, Winfried Pohlmeier, David Veredas

Shedding mild on probably the most urgent open questions within the research of excessive frequency facts, this quantity offers state of the art advancements in excessive frequency monetary econometrics. insurance spans a various variety of themes, together with marketplace microstructure, tick-by-tick info, bond and foreign currencies markets, and massive dimensional volatility modeling. the amount is of curiosity to graduate scholars, researchers, and professionals.

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The real data is much more concentrated in the outcome (0,0), as well as evidencing much fatter tails. There is a clear signal for a tail dependency in the data generating process, as the extreme positive or negative movements of the exchange rates take place much more often than could be explained by a standard Gaussian copula function (see Fig. 10). Additionally, we can address the goodness-of-fit of the conditional bivariate density by considering the bivariate autocorrelation function of the residual series εˆ t = (ˆεt1 , εˆ t2 )′ depicted in Fig.

7). We observe that there is a certain dynamic pattern, which should be explained by the ACM part of the ICH model. As indicated by the negative first-order autocorrelation and the positive first-order cross correlation coefficients, the probability of an upward movement of each exchange rate following a downward movement is significantly more probable than two subsequent negative or positive movements. In Fig. 5 the autocorrelograms for the absolute value of the non-zero exchange rate changes are presented.

Finally, the standardised residuals are substantially closer to the normal distribution in Eq. (20) compared with the other two EGARCH specifications. 4 Conclusions Our study of weekly Norwegian exchange rate volatility sheds new light on the mixture of distribution hypothesis in several ways. We find that the impact of changes in the number of information events is positive and statistically significant within two different frameworks, that the impact is relatively stable across three different exchange rate regimes for both weekly and realised volatility, and that the estimated impacts are relatively similar in both cases.

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