Testing for Neglected Nonlinearity in Weekly Foreign Exchange Rates
This study investigates the presence of neglected nonlinearity in weekly exchange rates of five countries in terms of Australian dollar. Three prominent nonlinear models from the ARCH family, such as the EGARCH, GARCH-M and EGARCH-M are fitted to the first differenced log of exchange rate series....
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| Format: | Journal Article |
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Academic Research Council
2011
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| Online Access: | http://econpapers.repec.org/article/bapjournl/110306.htm http://hdl.handle.net/20.500.11937/57653 |
| _version_ | 1848760187076214784 |
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| author | Sadique, Shibley |
| author_facet | Sadique, Shibley |
| author_sort | Sadique, Shibley |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | This study investigates the presence of neglected nonlinearity in weekly exchange rates of five countries in terms of Australian dollar. Three prominent nonlinear models from the ARCH family, such as the EGARCH, GARCH-M and EGARCH-M are fitted to the first differenced log of exchange rate series. The logs of the squared standardized residuals from the fitted models are tested for any leftover nonlinear structure using the BDS test. The nature of the leftover nonlinear dependence is identified using the Odd Product Moment Test of Hsieh (1991). Overall, the empirical evidence obtained in this study support the claim that the ARCH-type models cannot capture all the nonlinearities in financial asset returns. |
| first_indexed | 2025-11-14T10:11:47Z |
| format | Journal Article |
| id | curtin-20.500.11937-57653 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T10:11:47Z |
| publishDate | 2011 |
| publisher | Academic Research Council |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-576532017-11-24T05:24:16Z Testing for Neglected Nonlinearity in Weekly Foreign Exchange Rates Sadique, Shibley Neglected nonlinearity ARCH-type models Exchange rates This study investigates the presence of neglected nonlinearity in weekly exchange rates of five countries in terms of Australian dollar. Three prominent nonlinear models from the ARCH family, such as the EGARCH, GARCH-M and EGARCH-M are fitted to the first differenced log of exchange rate series. The logs of the squared standardized residuals from the fitted models are tested for any leftover nonlinear structure using the BDS test. The nature of the leftover nonlinear dependence is identified using the Odd Product Moment Test of Hsieh (1991). Overall, the empirical evidence obtained in this study support the claim that the ARCH-type models cannot capture all the nonlinearities in financial asset returns. 2011 Journal Article http://hdl.handle.net/20.500.11937/57653 http://econpapers.repec.org/article/bapjournl/110306.htm Academic Research Council restricted |
| spellingShingle | Neglected nonlinearity ARCH-type models Exchange rates Sadique, Shibley Testing for Neglected Nonlinearity in Weekly Foreign Exchange Rates |
| title | Testing for Neglected Nonlinearity in Weekly Foreign Exchange Rates |
| title_full | Testing for Neglected Nonlinearity in Weekly Foreign Exchange Rates |
| title_fullStr | Testing for Neglected Nonlinearity in Weekly Foreign Exchange Rates |
| title_full_unstemmed | Testing for Neglected Nonlinearity in Weekly Foreign Exchange Rates |
| title_short | Testing for Neglected Nonlinearity in Weekly Foreign Exchange Rates |
| title_sort | testing for neglected nonlinearity in weekly foreign exchange rates |
| topic | Neglected nonlinearity ARCH-type models Exchange rates |
| url | http://econpapers.repec.org/article/bapjournl/110306.htm http://hdl.handle.net/20.500.11937/57653 |