LONG-RANGE DEPENDENCE IN EXCHANGE RATES: THE CASE OF THE EUROPEAN MONETARY SYSTEM

Sergio R. S. Souza, Benjamin Tabak and Daniel Cajueiro
Additional contact information
Sergio R. S. Souza: Banco Central do Brasil, SBS Quadra 3, Bloco B, Ed. Sede, 9 andar, Brasilia, DF, 70074-900, Brazil

International Journal of Theoretical and Applied Finance (IJTAF), 2008, vol. 11, issue 02, 199-223

Abstract: In this work we measure the evolution of the long-range dependence phenomenon of returns and volatilities of nominal British exchange rates (British pound against US dollar) futures contracts negotiated on the Chicago Mercantile Exchange from 1986 to 2004. The measurement employs the R/S classic analysis, Detrended Fluctuation Analysis and Generalized Hurst exponents, upon a 1008-observation window, which moves along the data. We obtain as a result, the effects of the 1992 European financial crisis on the measurements of the long-range dependency phenomenon. After the crisis the returns of this futures contract showed no signs of the long-range memory, which existed before the crisis. The volatility presented moderate long-range memory the whole time. We also test for long-memory in European currencies inside the European Monetary System and find evidence of moderate long memory, which suggests that being inside the EMS increases predictability.

Keywords: Long memory; exchange rates; R/S analysis; financial crisis (search for similar items in EconPapers)
Date: 2008
References: View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219024908004774
Access to full text is restricted to subscribers

Related works:
Working Paper: Long-Range Dependence in Exchange Rates: the case of the European Monetary System (2007)
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: https://EconPapers.repec.org/RePEc:wsi:ijtafx:v:11:y:2008:i:02:n:s0219024908004774

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219024908004774

Access Statistics for this article

International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston

More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().