Exchange Rate Returns Standardized by Realized Volatility are (Nearly) Gaussian / Torben G. Andersen, Tim Bollerslev, Francis X. Diebold, Paul Labys.

Format:

Book

Author/Creator:

Andersen, Torben G.

Contributor:

National Bureau of Economic Research.

Bollerslev, Tim.

Diebold, Francis X.

Labys, Paul.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7488.

NBER working paper series no. w7488

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Exchange Rate Returns Standardized by Realized Volatility are

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2000.

Summary:

It is well known that high-frequency asset returns are fat-tailed relative to the Gaussian distribution tails are typically reduced but not eliminated when returns are standardized by volatilities estimated from popular models such as GARCH. We consider two major dollar exchange rates, and we show that returns standardized instead by the realized volatilities of Andersen, Bollerslev, Diebold and Labys (1999) are very nearly Gaussian. We perform both univariate and multivariate analyses, we trace the different effects of the different standardizations to differences in information sets, and we draw implications for the presence of jumps in exchange rate diffusions.

Notes:

Print version record

January 2000.