Intra-day dynamics of exchange rates: New evidence from quantile regression
Konstantin Kuck () and
The Quarterly Review of Economics and Finance, 2019, vol. 71, issue C, 247-257
This study provides a comprehensive description of the intra-day dynamics of major US-Dollar spot exchange rates. We use quantile autoregression to investigate the presence of (non-)linear temporal dependence in foreign exchange returns at various intra-daily time-horizons, ranging from ten minutes up to three hours. Specifically, we investigate an 11-year long sample of non-intermittent high frequency returns for the Euro (EUR), the British Pound (GBP) and the Japanese Yen (JPY) against the US-Dollar (USD). In contrast to previous studies, we find the temporal dependence of intra-daily foreign exchange returns to be non-linear and symmetrically U-shaped. Specifically, we observe pronounced negative autocorrelation for moderate USD appreciations and depreciations (central quantiles). For extreme positive and negative USD movements, we detect positive autocorrelation. This symmetric non-linear form of temporal dependence is remarkably stable across different exchange rates and states of the market. It appears to be a unique feature of foreign exchange returns and might be related to the fundamental ‘two-sidedness’ of foreign exchange markets.
Keywords: Foreign exchange; Autocorrelation; Quantile regression; State-dependence; Non-linearity (search for similar items in EconPapers)
JEL-codes: C22 G14 F31 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:71:y:2019:i:c:p:247-257
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