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Poisson Jumps and Long Memory Volatility Process in High Frequency European Exchange Rates

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Authors
Han, YoungWook
Issue Date
2007-04
Publisher
Institute of Economic Research, Seoul National University
Citation
Seoul Journal of Economics, Vol.20 No.2, pp. 201-222
Keywords
High frequency foreign exchange ratesFIGARCHLong memory propertyNormal mixture distribution
Abstract
This paper analyzes the intriguing features of 30-minute

European foreign exchange rates during the year 1996; jumps

and long memory volatility process. The FIGARCH model with

the Poisson distribution is applied in order to consider both the

jumps in the conditional mean process and the long memory

property in the conditional variance process of the high

frequency foreign exchange returns series. The general results

show that the Poisson distribution accounts for the jumps in

the high frequency foreign exchange rates returns quite well and

that the jumps seem to spuriously induce higher long memory

property in the high frequency foreign exchange returns. Hence,

the FIGARCH model with the Poisson distribution appears to be

quite appropriate for the specification of the high frequency

returns.
ISSN
1225-0279
Language
English
URI
https://hdl.handle.net/10371/1379
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of Economics (SJE)Seoul Journal of Economics vol.20(2) (Summer 2007)
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