Research Discussion Papers, Bank of Finland
Exchange rate volatility, macro announcements and the choice of intraday seasonality filtering method
Abstract: Filtering intraday seasonality in volatility is crucial
for using high frequency data in econometric analysis. This paper studies
the effects of filtering on statistical inference concerning the impact of
news on exchange rate volatility. The properties of different methods are
studied using a 5-minute frequency USD/EUR data set and simulated returns.
The simulation results suggest that all the methods tend to produce
downward-biased estimates of news coefficients, some more than others. The
study supports the Flexible Fourier Form method as the best for seasonality
Keywords: high-frequency; volatility; macro announcements; seasonality; (follow links to similar papers)
JEL-Codes: C22; C49; C52; E44; (follow links to similar papers)
32 pages, November 28, 2007
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