Forecasting Exchange Rate Volatility with High Frequency Data: Is the Euro Different?

Georgios Chortareas, John Nankervis and Ying Jiang
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John Nankervis: University of Essex
Ying Jiang: University of Essex

No 79, Money Macro and Finance (MMF) Research Group Conference 2006 from Money Macro and Finance Research Group

Abstract: This paper focuses on forecasting volatility of high frequency Euro exchange rates. Four 15 minute frequency Euro exchange rate series, including Euro/CHF, Euro/GBP, Euro/JPY and Euro/USD, are used to test the forecast performance of six models, including both traditional time series volatility models and the realized volatility model. Besides the normally used regression test and accuracy test, an equal accuracy test, the HLN-DM test, and a superior predictive ability test are also employed in the out-of-sample forecast evaluation. The FIGARCH model is found to be superior in almost all exchange rate series. Although the widely preferred ARFIMA model shows better performance than the traditional daily volatility models, generally speaking, it cannot surpass the FIGARCH model and the intraday GARCH model. Furthermore, the SVX model does not significantly outperform the SV model in the accuracy test, which contradicts the results of some earlier research. The paper confirms the advantage of using high frequency data and modelling the long memory factor. It also analyses the characteristics of Euro exchange rates and compares the test results with the conclusions drawn by previous studies

Keywords: exchange rates; volatility; euro; high frequency (search for similar items in EconPapers)
JEL-codes: C22 F31 (search for similar items in EconPapers)
Date: 2007-02-02
New Economics Papers: this item is included in nep-cba, nep-eec, nep-ets, nep-for, nep-ifn and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mmf:mmfc06:79

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