Conditional heteroscedasticity of exchange rates: further results based on the fractionally integrated approach

Abstract

AbstractA recent article (Tse, 1998) published in this journal analysed the conditional heteroscedasticity of the yen–dollar exchange rate based on the fractionally integrated asymmetric power ARCH model. In this paper, we present replication results using Tse's (1998) yen–dollar series. We also examine the robustness of Tse's (1998) findings across different currencies, sample periods and non‐nested GARCH‐type models. Unlike Tse (1998), we find some evidence of asymmetric conditional volatility for daily returns of currencies measured against the dollar or the yen. Copyright © 2004 John Wiley & Sons, Ltd.