Dynamic Linkages in the Pairs (GBP/EUR, USD/EUR) and (GBP/USD, EUR/USD): How Do They Change During a Day?

Małgorzata Doman () and Ryszard Doman ()
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Małgorzata Doman: Poznań University of Economics
Ryszard Doman: Adam Mickiewicz University in Poznań

Central European Journal of Economic Modelling and Econometrics, 2014, vol. 6, issue 1, 33-56

Abstract: In the paper, we document how conditional dependencies observed in the FOREX market change during a trading day. The analysis is performed for the pairs (GBP/EUR, USD/EUR) and (GBP/USD, EUR/USD) of exchange rates. We consider daily returns calculated using the exchange rates quoted at different hours of a day. The dynamics of the dependencies is modeled by means of 3-regime Markov regime switching copula models, and the strength of the linkages is described using dynamic Spearman’s rho and the dynamic coefficients of tail dependence. The established approach allows us to monitor the changes in the dependence structure.

Keywords: exchange rates; FOREX; linkages; copula; Markov regime switching; Spearman’s rho; volatility; tail dependence; crisis (search for similar items in EconPapers)
JEL-codes: C11 C15 C52 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:psc:journl:v:6:y:2014:i:1:p:33-56

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