{"title":"The factor structure of exchange rates volatility: global and intermittent factors","authors":"","doi":"10.1007/s00181-023-02542-3","DOIUrl":null,"url":null,"abstract":"<h3>Abstract</h3> <p>In this paper, we consider a fractionally integrated multi-level dynamic factor model (FI-ML-DFM) to represent commonalities in the hourly evolution of realized volatilities of several international exchange rates. The FI-ML-DFM assumes common global factors active during the 24 h of the day, accompanied by intermittent factors, which are active at mutually exclusive times. We propose determining the number of global factors using a distance among the intermittent loadings. We show that although the bulk of common dynamics of exchange rates realized volatilities can be attributed to global factors, there are non-negligible effects of intermittent factors. The effect of the COVID-19 on the realized volatility comovements is stronger on the first global-in-time factor, which shows a permanent increase in the level. The effects on the second global factor and on the intermittent factors active when the EU, UK and US markets are operating are transitory lasting for approximately a year after the pandemic starts. Finally, there seems to be no effect of the pandemic neither on the third global factor nor on the intermittent factor active when the markets in Asia are operating.</p>","PeriodicalId":11642,"journal":{"name":"Empirical Economics","volume":"33 1","pages":""},"PeriodicalIF":1.9000,"publicationDate":"2024-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Empirical Economics","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1007/s00181-023-02542-3","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
In this paper, we consider a fractionally integrated multi-level dynamic factor model (FI-ML-DFM) to represent commonalities in the hourly evolution of realized volatilities of several international exchange rates. The FI-ML-DFM assumes common global factors active during the 24 h of the day, accompanied by intermittent factors, which are active at mutually exclusive times. We propose determining the number of global factors using a distance among the intermittent loadings. We show that although the bulk of common dynamics of exchange rates realized volatilities can be attributed to global factors, there are non-negligible effects of intermittent factors. The effect of the COVID-19 on the realized volatility comovements is stronger on the first global-in-time factor, which shows a permanent increase in the level. The effects on the second global factor and on the intermittent factors active when the EU, UK and US markets are operating are transitory lasting for approximately a year after the pandemic starts. Finally, there seems to be no effect of the pandemic neither on the third global factor nor on the intermittent factor active when the markets in Asia are operating.
期刊介绍：
Empirical Economics publishes high quality papers using econometric or statistical methods to fill the gap between economic theory and observed data. Papers explore such topics as estimation of established relationships between economic variables, testing of hypotheses derived from economic theory, treatment effect estimation, policy evaluation, simulation, forecasting, as well as econometric methods and measurement. Empirical Economics emphasizes the replicability of empirical results. Replication studies of important results in the literature - both positive and negative results - may be published as short papers in Empirical Economics. Authors of all accepted papers and replications are required to submit all data and codes prior to publication (for more details, see: Instructions for Authors).The journal follows a single blind review procedure. In order to ensure the high quality of the journal and an efficient editorial process, a substantial number of submissions that have very poor chances of receiving positive reviews are routinely rejected without sending the papers for review.Officially cited as: Empir Econ
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