Economics at your fingertips  

An empirical note about estimation and forecasting Latin American Forex returns volatility: the role of long memory and random level shifts components

Gabriel Rodríguez (), Junior A. Ojeda Cunya and José Carlos Gonzáles Tanaka
Additional contact information
Junior A. Ojeda Cunya: Pontificia Universidad Católica del Perú
José Carlos Gonzáles Tanaka: Pontificia Universidad Católica del Perú

Portuguese Economic Journal, 2019, vol. 18, issue 2, No 3, 107-123

Abstract: Abstract A set of RLS-type models with ARMA and ARFIMA dynamics is estimated and compared in a forecasting exercise with ARFIMA, GARCH and FIGARCH models. It is an extension of Rodríguez (N Am J Econ Financ 42:393–420, 2017) but using more countries and working with squared returns in the forecasting exercise. The estimation results show: (i) existence of RLS; (ii) measurement errors except in Chile and Colombia. Regarding the fractional parameter, the estimates are quite small indicating the possible absence of long memory with possible exceptions of Chile and Colombia. The forecast exercise using the 10% MCS of Hansen et al. (Econometrica 79:453–497, 2011) and the ratios of MSFE indicate absence of the RLS-ARFIMA models while RLS-ARMA models are selected. In general, the results of the estimations and forecasts indicate probable absence of long memory or its small magnitude, which would makes this characteristic not only unnecessary but also irrelevant to capture the variations of the low frequencies of the series.

Keywords: Random Level Shifts; Long memory; Latin American Forex Markets; Volatility; Time Varying Probability; Mean reversion; ARFIMA models; GARCH model; FIGARCH model (search for similar items in EconPapers)
JEL-codes: C22 C52 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10258/PS2

DOI: 10.1007/s10258-019-00156-1

Access Statistics for this article

Portuguese Economic Journal is currently edited by Luís F. Costa

More articles in Portuguese Economic Journal from Springer, Instituto Superior de Economia e Gestao
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2021-10-27
Handle: RePEc:spr:portec:v:18:y:2019:i:2:d:10.1007_s10258-019-00156-1