Generalized Asymmetric Power ARCH Modeling of Exchange Rate Volatility

M. McKenzie and H. Michell

Working Papers from Melbourne - Centre in Finance

Abstract: This paper considers the ability of the Power ARCH model introduced by Ding, Granger and Engle (1993) to capture the stylised features of volatility in 17 heavily traded bilateral exchange rates. This Power ARCH model nests a number of models from the ARCH family. The relative merits of these nested ARCH models can be considered using the standard log likelihood ratio test. The results of this paper suggest that in the presence of symmetric responses to innovations in the market, the GARCH(1,1) model is preferred. Where asymmetry is present, than the inclusion of a leverage term is worthwhile as long as a power term is also included.

Keywords: EXCHANGE RATE; ECONOMIC MODELS; VOLATILITY (search for similar items in EconPapers)
JEL-codes: C50 C51 F32 (search for similar items in EconPapers)
Pages: 19 pages
Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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: https://EconPapers.repec.org/RePEc:fth:melrfi:98-2

Access Statistics for this paper

More papers in Working Papers from Melbourne - Centre in Finance Centre in Finance, Department of Economics and Finance, Faculty of Business, RMIT GPO Box 2476V Melbourne, Vic 3000 Australia.. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Krichel ().