Episodic nonstationarity in exchange rates
Open Access
- 1 November 1998
- journal article
- research article
- Published by Taylor & Francis Ltd in Applied Economics Letters
- Vol. 5 (11), 719-722
- https://doi.org/10.1080/135048598354203
Abstract
We examine a method recently proposed by Hinich and Patterson (mimeo, University of Texas at Austin, 1995) for testing the validity of specifying a GARCH error structure for financial time series data in the context of a set of ten daily Sterling exchange rates. The results demonstrate that there are statistical structures present in the data that cannot be captured by a GARCH model, or any of its variants. This result has important implications for the interpretation of the recent voluminous literature which attempts to model financial asset returns using this family of models.Keywords
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