A major issue in financial economics is the behavior of asset returns over long horizon as opposed to short horizons. This study provides empirical evidence from the perspective of long memory analysis. Evidence of long memory is explored using international currency prices for fourteen countries. The measure of long-term persistence employed is the modified rescaled range statistic proposed by Lo (1991), which tests for long-range dependence after having accounted for a wide range of short-memory processes. Further analysis is conducted on the squared and absolute returns of the series, using the procedure proposed by Geweke and Porter-Hudak (1983). The empirical results provide strong support for long memory in international currency returns, squared returns and absolute returns. Most of the d estimates fall in the range of (0, 1/2), a characteristic of the hyperbolic decay of the autocorrelation function of ARFIMA models in their ability of capturing the long memory property. These findings suggest that models of exchange rate should be made to accommodate the long memory in the conditional mean and variance of the returns. / A related issue is the performance in finite samples of the different tests and estimators under Stable-ARFIMA process. Using Monte Carlo simulations, it is found that the traditional and modified R/S behaves in a similar fashion. Different estimators of the long-memory parameter are then compared for processes with stable errors.
| Identifer | oai:union.ndltd.org:LACETR/oai:collectionscanada.gc.ca:QMM.35849 |
| Date | January 1999 |
| Creators | Assaf, Ata A. |
| Contributors | Galbraith, John (advisor) |
| Publisher | McGill University |
| Source Sets | Library and Archives Canada ETDs Repository / Centre d'archives des thèses électroniques de Bibliothèque et Archives Canada |
| Language | English |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Format | application/pdf |
| Coverage | Doctor of Philosophy (Department of Economics.) |
| Rights | All items in eScholarship@McGill are protected by copyright with all rights reserved unless otherwise indicated. |
| Relation | alephsysno: 001656212, proquestno: NQ50104, Theses scanned by UMI/ProQuest. |
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