Exchange Rate Returns Standardized by Realized Volatility are (Nearly) Gaussian

Torben Andersen, Tim Bollerslev, Francis Diebold and Paul Labys

No 7488, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: It is well known that high-frequency asset returns are fat-tailed relative to the Gaussian distribution tails are typically reduced but not eliminated when returns are standardized by volatilities estimated from popular models such as GARCH. We consider two major dollar exchange rates, and we show that returns standardized instead by the realized volatilities of Andersen, Bollerslev, Diebold and Labys (1999) are very nearly Gaussian. We perform both univariate and multivariate analyses, we trace the different effects of the different standardizations to differences in information sets, and we draw implications for the presence of jumps in exchange rate diffusions.

JEL-codes: C0 G0 (search for similar items in EconPapers)
Date: 2000-01
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ifn
Note: AP
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Citations: View citations in EconPapers (113)

Published as Andersen, Torben G., Tim Bollerslev, Francis X. Diebold and Paul Labys. "The Distribution Of Realized Exchange Rate Volatility," Journal of the American Statistical Association, 2001, v96(453,Mar), 42-55.
Published as Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2000. "Exchange Rate Returns Standardized by Realized Volatility are (Nearly) Gaussian," Multinational Finance Journal, Multinational Finance Journal, vol. 4(3-4), pages 159-179, September.

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Journal Article: Exchange Rate Returns Standardized by Realized Volatility are (Nearly) Gaussian (2000)
Working Paper: Exchange Rate Returns Standardized by Realized Volatility are (Nearly) Gaussian (1999)
Working Paper: Exchange Rate Returns Standardized by Realized Volatility Are (Nearly) Gaussian (1999)
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