The Distribution of Daily Exchange Rate Returns

Slaveya Zhelyazkova ()
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Slaveya Zhelyazkova: University of Economics - Varna

Izvestia Journal of the Union of Scientists - Varna. Economic Sciences Series, 2017, issue 2, 174-186

Abstract: In this paper we describe the distribution of daily exchange rate returns (first differences of daily log exchange rates) of twelve currencies against USD (4310 observations). The results show that the distribution of exchange rate returns is leptokurtic and asymmetric and significantly deviates from the normal distribution according to all applied normality tests. We fit three distributions to the standardized first differences of log exchange rates - t-distribution, generalized error distribution and skewed t-distribution in order to capture the positive excess kurtosis and asymmetry in the empirical distribution. Several goodness-of-fit tests based on the empirical distribution function and Chi-Square test are applied and the results show that at least one of the three distributions fits the data well.

Keywords: exchange rate returns; distribution fitting; generalized error distribution; skewed t-distribution (search for similar items in EconPapers)
JEL-codes: A00 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:vra:journl:y:2017:i:2:p:174-186

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