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Exchange Rate Returns and Volatility: The Role of Time-Varying Rare Disaster Risks

Rangan Gupta (), Tahir Suleman () and Mark Wohar ()

No 201767, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper provides empirical evidence to the theoretical claim that rare disaster risks have predictability for exchange rate returns and volatility using a nonparametric quantile-based methodology. Using dollar-based exchange rates for Brazil, Russia, India, China, and South Africa, the quantile-causality test shows that indeed rare disaster-risks affects both returns and volatility over the majority of their respective conditional distributions. In addition, these effects are much stronger when compared to those using the British pound, especially in terms of currency returns

Keywords: Exchange Rate Returns and Volatility; Rare Disasters; Nonparametric Quantile Causality (search for similar items in EconPapers)
JEL-codes: C22 C58 G14 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cis, nep-ore and nep-rmg
Date: 2017-09
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Journal Article: Exchange rate returns and volatility: the role of time-varying rare disaster risks (2019) Downloads
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