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Modelling Foreign Exchange Realized Volatility Using High Frequency Data: Long Memory versus Structural Breaks

Abderrazak Ben Maatoug (), Rim Lamouchi (), Russell Davidson () and Ibrahim Fatnassi ()
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Abderrazak Ben Maatoug: University of Bisha
Rim Lamouchi: University of Tunis
Russell Davidson: Centre de la Vielle Charité
Ibrahim Fatnassi: University of Tunis

Central European Journal of Economic Modelling and Econometrics, 2018, vol. 10, issue 1, 1-25

Abstract: In this study, we model realized volatility constructed from intra-day high-frequency data. We explore the possibility of confusing long memory andstructural breaks in the realized volatility of the following spot exchange rates: EUR/USD, EUR/JPY, EUR/CHF, EUR/GBP, and EUR/AUD. The results show evidence for the presence of long memory in the exchange rates’ realized volatility. From the Bai–Perron test, we found structural breakpoints that match significant events in financial markets. Furthermore, the findings provide strong evidence in favour of the presence of long memory.

Keywords: foreign exchange markets; realized volatility; high-frequency data; long memory; structural change (search for similar items in EconPapers)
JEL-codes: C22 C32 C58 F31 G15 (search for similar items in EconPapers)
Date: 2018
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