Exchange Rate Volatility and the Mixture of Distribution Hypothesis
31 Pages Posted: 14 Apr 2005
There are 2 versions of this paper
Exchange Rate Volatility and the Mixture of Distribution Hypothesis
Exchange Rate Volatility and the Mixture of Distribution Hypothesis
Date Written: January 30, 2005
Abstract
This paper sheds new light on the mixture of distribution hypothesis by means of a study of the exchange rate volatility of the Norwegian krone. First, we find that the impact of changes in the number of information events on exchange rate volatility is statistically significant, and recursive parameter analysis suggests the impact is relatively stable across three different exchange rate regimes. Second, our results do not support the hypothesis that an increase in the number of traders reduces exchange rate volatility. Finally, we report a case in which undesirable residual properties attained within traditional frameworks are easily removed by applying the log-transformation on volatilities.
Keywords: Exchange rate volatility, log-linear analysis, mixture of distribution hypothesis
JEL Classification: F31
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange
By Clara Vega, Torben G. Andersen, ...
-
Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange
By Torben G. Andersen, Clara Vega, ...
-
By Torben G. Andersen and Tim Bollerslev
-
Tests of Microstructural Hypotheses in the Foreign Exchange Market
-
Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information