Common Volatility across Latin American Foreign Exchange Markets

Isabel Ruiz ()

No 702, Working Papers from Sam Houston State University, Department of Economics and International Business

Abstract: This paper uses high frequency exchange rate data for a group of twelve Latin American countries to analyze volatility comovements. Particular interest is posed on understanding the existence of a common volatility process during the 1994–2005 period. The analysis relies on bivariate common factor models. We test for second-order common features using the common ARCH-feature methodology developed by Engle and Kozicki (1993). Overall, the results of this paper indicate that while most currencies display evidence of time-varying variance, the volatility movements in the Latin American foreign exchange markets seems to be mainly country specific. Only a few markets show evidence of a common volatility process.

Date: 2007-03
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Journal Article: Common volatility across Latin American foreign exchange markets (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:shs:wpaper:0702

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