What drives volatility persistence in the foreign exchange market?

• 成果类型: Article
• 署名作者: Berger, David; Chaboud, Alain; Hjalmarsson, Erik
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors; Yale University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2008.10.006
• 发表日期: 2009
• 页码: 192-213
• 关键词: Volatility persistence; high-frequency data; realized volatility; long memory; Exchange rates

摘要

We propose a new empirical specification of volatility that links volatility to the information flow, measured as the order flow in the market, and to the price sensitivity to that information. The time-varying market sensitivity to information is estimated from high-frequency data, and movements in volatilitycanthereforebedirectlyrelated to movements in order flow and market sensitivity. Empirically, the model explains a large share of the long-run variation involatility. Importantly, the time variation in the market's sensitivity to information is atleast as relevant in explaining the persistence of volatility as the rate of information arrival itself. This may be evidence of a link between changes over time in the aggregate behavior of market participants and the time-series properties of realized volatility. Published by Elsevier B.V.