Long Memory and Forecasting in Euroyen Deposit Rates

John Barkoulas and Christopher Baum

No 361, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: We test for long memory in 3- and 6-month daily returns series on Eurocurrency deposits denominated in Japanese yen (Euroyen). The fractional differencing parameter is estimated using the spectral regression method. The conflicting evidence obtained from the application of tests against a unit root as well as tests against stationarity provides the motivation for testing for fractional roots. Significant evidence of positive long-range dependence is found in the Euroyen returns series. The estimated fractional models result in dramatic out-of-sample forecasting improvements over longer horizons compared to benchmark linear models, thus providing strong evidence against the martingale model. Series: Boston College Working Papers in Economics

Keywords: long memory; ARFIMA processes; spectral regression; unit roots; forecasting (search for similar items in EconPapers)
JEL-codes: C22 G12 (search for similar items in EconPapers)
Pages: 27 pages
Date: 1997-02-01
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Citations: View citations in EconPapers (9)

Published, Financial Engineering and the Japanese Markets, 1997, 4:189-201.

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Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:361

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