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Higher moments and exchange rate behavior
journal contribution
posted on 2019-02-01, 00:00 authored by S Khademalomoom, Paresh Narayan, Susan SharmaSusan SharmaThis paper uses 15-minute exchange rate returns data for the six most liquid currencies (i.e., the Australian dollar, British pound, Canadian dollar, Euro, Japanese yen, and Swiss franc) vis-à-vis the United States dollar to examine whether a GARCH model augmented with higher moments (HM-GARCH) performs better than a traditional GARCH (TG) model. Two findings are unraveled. First, the inclusion of odd/even moments in modeling the return/variance improves the statistical performance of the HM-GARCH model. Second, trading strategies that extract buy and sell trading signals based on exchange rate forecasts from HM-GARCH models are more profitable than those that depend on TG models.
History
Journal
Financial reviewVolume
54Issue
1Pagination
201 - 229Publisher
WileyLocation
Chichester, Eng.Publisher DOI
ISSN
0732-8516eISSN
1540-6288Language
engPublication classification
C1 Refereed article in a scholarly journalCopyright notice
2019, The Eastern Finance AssociationUsage metrics
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