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Forecasting (Good and Bad) Realized Exchange-Rate Volatility: Is there a Role for Realized Skewness and Kurtosis?

Konstantinos Gkillas (Gillas) (), Rangan Gupta () and Christian Pierdzioch

No 201879, Working Papers from University of Pretoria, Department of Economics

Abstract: This study investigates U.S. political cycles and the impact, thereof on stock market volatility in advanced economies (Canada, France, Germany, Italy, Japan, Switzerland and the U.K.) using monthly data over the period January 1921 to December 2017. Overall, the results indicate that the type (Democratic or Republican) of presidential administration does play a role in the behaviour of stock returns, and volatility, but the results and direction of the impact are sample specific. In general, the results tend to suggest an increase in returns and volatility of other stock markets when there is a democratic government in the U.S. This study suggests that there is a need for market participants to start analysing the trajectory of a certain election, beginning at the proposed event window, in order to manage their risks and be at a stable position during these periods of uncertainties.

Keywords: Exchange rates; Realized volatility; Forecasting (search for similar items in EconPapers)
JEL-codes: C22 F31 F37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-rmg
Date: 2018-11
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