Exchange Rate Returns Standardized by Realized Volatility are (Nearly) Gaussian
Torben Andersen (),
Tim Bollerslev (),
Francis Diebold () and
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Paul Labys: University of Pennsylvania, U.S.A.
Multinational Finance Journal, 2000, vol. 4, issue 3-4, 159-179
It is well known that high-frequency asset returns are fat-tailed relative to the Gaussian distribution, and that the fat tails are typically reduced but not eliminated when returns are standardized by volatilities estimated from popular ARCH and stochastic volatility models. We consider two major dollar exchange rates, and we show that returns standardized instead by the realized volatilities of Andersen, Bollerslev, Diebold and Labys (2000a) are very nearly Gaussian. We perform both univariate and multivariate analyses, and we trace the differing effects of the different standardizations to differences in information sets.
Keywords: high-frequency data; integrated volatility; realized volatility; risk management (search for similar items in EconPapers)
JEL-codes: C10 C22 C32 G12 G15 (search for similar items in EconPapers)
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Working Paper: Exchange Rate Returns Standardized by Realized Volatility are (Nearly) Gaussian (2000)
Working Paper: Exchange Rate Returns Standardized by Realized Volatility are (Nearly) Gaussian (1999)
Working Paper: Exchange Rate Returns Standardized by Realized Volatility Are (Nearly) Gaussian (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:mfj:journl:v:4:y:2000:i:3-4:p:159-179
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