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Licensed Unlicensed Requires Authentication Published by De Gruyter Oldenbourg April 6, 2016

Does the Forward Discount Represent a Long Memory Process or Short Memory Process with Multiple Changes in the Mean?

Aidil Rizal Shahrin

Summary

This study aims to determine whether forward discount represents a long memory or short memory process with multiple changes in the mean. Based on the samples of six currencies from November 3, 1986, to March 6, 1998, using Baek and Pipiras’s (2012, 2014) statistical procedures, our findings suggest that forward discount is a short memory process with multiple changes in the mean rather than long memory. These changes in mean are the result of an intervention by monetary authorities in the forex market. Thus, earlier findings of long memory in forward discount, as reported in the extant literature, are questionable.

Online erschienen: 2016-4-6
Erschienen im Druck: 2015-12-1

© 2015 by Lucius & Lucius, Stuttgart

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