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Choosing a data frequency to forecast the quarterly yen-dollar exchange rate

Potentially valuable information about the underlying data generating process of a dependent variable is often lost when an independent variable is transformed to fit into the same sampling frequency as a dependent variable. With the mixed data sampling (MIDAS) technique and increasingly available data at high frequencies, the issue of choosing an optimal sampling frequency becomes apparent. We use financial data and the MIDAS technique to estimate thousands of regressions and forecasts in the quarterly, monthly, weekly, and daily sampling frequencies. Model fit and forecast performance measurements are calculated from each estimation and used to generate summary statistics for each sampling frequency so that comparisons can be made between frequencies. Our regression models contain an autoregressive component and five additional independent variables and are estimated with varying lag length specifications that incrementally increase up to five years of lags. Each regression is used to forecast a rolling, one and two-step ahead, static forecast of the quarterly Yen and U.S Dollar spot exchange rate. Our results suggest that it may be favourable to include high frequency variables for closer modeling of the underlying data generating process but not necessarily for increased forecasting performance. / Graduate / 0501 / 0508 / 0511 / benjamincann@gmail.com

Identiferoai:union.ndltd.org:uvic.ca/oai:dspace.library.uvic.ca:1828/7587
Date03 October 2016
CreatorsCann, Benjamin
ContributorsGiles, David E. A.
Source SetsUniversity of Victoria
LanguageEnglish, English
Detected LanguageEnglish
TypeThesis
RightsAvailable to the World Wide Web, http://creativecommons.org/licenses/by-nd/2.5/ca/

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