The role of jumps in volatility spillovers in foreign exchange markets: meteor shower and heat waves revisited

Jerome Lahaye and Christopher Neely

No 2014-034, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper extends the previous literature on geographic (heat waves) and intertemporal (meteor showers) foreign exchange volatility transmission to characterize the role of jumps and cross-rate propagation. We employ heterogeneous autoregressive (HAR) models to capture the quasi-long-memory properties of volatility and the Shapley-Owen R2 measure to quantify the contributions of components. We conclude that meteor showers are more influential than heat waves, that jumps play a modest but significant role in volatility transmission and that significant, bidirectional cross-rate volatility transmission exists. Finally, we illustrate what types of news weaken or strengthen heat wave and meteor shower effects with sensitivity analysis.

Keywords: intraday; volatility; euro; exchange rates; transmission; dollar.; jumps; periodicity; yen; meteor shower; realized; heat wave (search for similar items in EconPapers)
JEL-codes: C13 C14 C32 C58 F31 F37 F65 G15 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2014-10-01
New Economics Papers: this item is included in nep-ets and nep-mon
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Citations: View citations in EconPapers (5)

Published in Journal of Business and Economic Statistics

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Related works:
Journal Article: The Role of Jumps in Volatility Spillovers in Foreign Exchange Markets: Meteor Shower and Heat Waves Revisited (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2014-034

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DOI: 10.20955/wp.2014.034

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