The statistical distribution of exchange rates: Empirical evidence and economic implications

doi:10.1016/S0022-1996(87)80025-9

Journal of International Economics

Volume 22, Issues 3–4, May 1987, Pages 297-319

https://doi.org/10.1016/S0022-1996(87)80025-9 Get rights and content

The abundant evidence that changes in exchange rates have distributions with fatter tails than the normal distribution has led researchers to consider non-normal distributions, including the Student, the stable Paretian and mixtures of distributions. This paper compares the empirical fits of three non-normal candidates and the normal distribution for daily changes in the logarithms of exchange rates, using maximum likelihood estimation of the parameters and chi-square goodness-of-fit tests. The Student and mixture of two normals provide the best fits, but there is evidence that the distribution parameters may vary over time.

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^*: We gratefully acknowledge financial support from the Social Science and Humanities Research Council of Canada. We wish to thank an anonymous referee for helpful comments and Shirley Haun for research assistance. Special thanks to John Petkau of the University of British Columbia Statistical Consulting and Research Laboratory for statistical advice.

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The statistical distribution of exchange rates: Empirical evidence and economic implications

Journal of International Money and Finance

Journal of International Money and Finance

Journal of International Economics

Economics Letters

Journal of Financial Economics

Journal of International Economics

A re-examination of the empirical distribution of stock price changes

Journal of the American Statistical Association

On some expansions of stable distributions

Arkiv für Matematik

A comparison of the stable and student distributions as statistical models for stock prices

Journal of Business

Estimators of the parameters of the student distribution and other fat-tailed distributions

University of Chicago Center for Mathematical Studies in Business and Economics Report 7501

Exchange rate risk and the bid-ask spread: A 7 country comparison

University of Alberta Discussion Paper No. 85-5.

Off the mark: Lessons for exchange rate modelling

Oxford Economic Papers, forthcoming

Stable distributions in statistical inference

Some properties of symmetric distributions

Journal of the American Statistical Association

Parameter estimates for symmetric stable distributions

Journal of the American Statistical Association