Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
964359 | Journal of International Money and Finance | 2010 | 19 Pages |
Abstract
We explore the possibility of structural breaks in the daily realized volatility of the Deutschemark/Dollar, Yen/Dollar and Yen/Deutschemark spot exchange rates with observed long memory behavior. We find that structural breaks in the mean can partly explain the persistence of realized volatility. We propose a VAR-RV-Break model that provides superior predictive ability when the timing of future breaks is known. With unknown break dates and sizes, we find that a VAR-RV-I(d) long memory model provides a robust forecasting method even when the true financial volatility series are generated by structural breaks.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Kyongwook Choi, Wei-Choun Yu, Eric Zivot,