A reexamination of fractional integrating dynamics in foreign currency markets [An article from: International Review of Economics and Finance]

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Description:
This paper reexamines foreign currency markets for evidence of fractional integration, and extends the extant literature in several important dimensions. First, we utilize a new semiparametric wavelet-based estimator, which is far superior to the more prevalent GPH estimator on the basis of mean squared error. Second, we utilize a broader and longer sample, which better facilitates the detection of long memory dynamics. Our analysis yields interesting empirical results that contrast with other recent studies. In particular, we find new evidence that a large proportion (14 out of 19) of exchange rate series display evidence of long memory, with little variation over alternative sample periods and alternative frequencies.