TY - JOUR
T1 - A Double-threshold GARCH Model for the French Franc/Deutschmark exchange rate
AU - Brooks, Chris
PY - 2001
Y1 - 2001
N2 - This paper combines and generalizes a number of recent time series models of daily exchange rate series by using a SETAR model which also allows the variance equation of a GARCH specification for the error terms to be drawn from more than one regime. An application of the model to the French Franc/Deutschmark exchange rate demonstrates that out-of-sample forecasts for the exchange rate volatility are also improved when the restriction that the data it is drawn from a single regime is removed. This result highlights the importance of considering both types of regime shift (i.e. thresholds in variance as well as in mean) when analysing financial time series.
AB - This paper combines and generalizes a number of recent time series models of daily exchange rate series by using a SETAR model which also allows the variance equation of a GARCH specification for the error terms to be drawn from more than one regime. An application of the model to the French Franc/Deutschmark exchange rate demonstrates that out-of-sample forecasts for the exchange rate volatility are also improved when the restriction that the data it is drawn from a single regime is removed. This result highlights the importance of considering both types of regime shift (i.e. thresholds in variance as well as in mean) when analysing financial time series.
U2 - 10.1002/1099-131X(200103)20:2<135::AID-FOR780>3.0.CO;2-R
DO - 10.1002/1099-131X(200103)20:2<135::AID-FOR780>3.0.CO;2-R
M3 - Article (Academic Journal)
SN - 0277-6693
VL - 20
SP - 135
EP - 143
JO - Journal of Forecasting
JF - Journal of Forecasting
IS - 2
ER -