Exchange rate returns and volatility: the role of time-varying rare disaster risks

Rangan Gupta, Tahir Suleman () and Mark Wohar

The European Journal of Finance, 2019, vol. 25, issue 2, 190-203

Abstract: This paper provides empirical evidence to the theoretical claim that rare disaster risks have predictability for exchange rate returns and volatility using a nonparametric quantile-based methodology. Using dollar-based exchange rates for Brazil, Russia, India, China, and South Africa, the quantile-causality test shows that indeed rare disaster-risks affects both returns and volatility over the majority of their respective conditional distributions. In addition, these effects are much stronger when compared to those using the British pound, especially in terms of currency returns.

Date: 2019
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Citations: View citations in EconPapers (15)

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Working Paper: Exchange Rate Returns and Volatility: The Role of Time-Varying Rare Disaster Risks (2017)
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DOI: 10.1080/1351847X.2018.1534750

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