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An examination of the intraday behavior of the yen/dollar exchange rate: The relationship between trading activity and returns volatility

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Abstract

This paper provides additional empirical evidence of the relationship between the volatility of returns and trading activity in foreign exchange markets. Five-minute yen/dollar returns exhibit significant skewness, kurtosis, negative first-order autocorrelation and heteroskedasticity. Market activity (as measured by the intensity of quote arrivals) has a positive and statistically significant effect on conditional returns volatility. Such evidence is consistent with predictions of mixture of distrubutions models.

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Authors and Affiliations

  1. Penn State-Erie, 16563-1400, Erie, PA

    Timothy R. Smaby

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  1. Timothy R. Smaby
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Smaby, T.R. An examination of the intraday behavior of the yen/dollar exchange rate: The relationship between trading activity and returns volatility. J Econ Finan 19, 39–50 (1995). https://doi.org/10.1007/BF02920213

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