Using Search Index to Predict the Volatility of Exchange Rate Based on HAR Model

DOI

10.2991/assehr.k.211209.453How to use a DOI?

Keywords

Exchange rate; HAR; Search index; Volatility

Abstract

The exchange rate is crucial to global financial markets. However, the existing literature rarely considers the impacts of the search index effects on the volatility of the exchange rate. With the gradual improvement of the realized volatility theory, researchers have found that the realized volatility has the characteristics of sharp peaks, thick tails, right-side deviation, and long memory, indicating that the Efficient Market Hypothesis is invalid. Based on Heterogeneous Autoregressive (HAR) theory, the new type HAR models are established by incorporating a search index to forecast the volatility. The new model’s predicting efficiency is better than the original one. Then, the RMB to U.S. dollar exchange rate (ERMB) and RMB exchange rate (RMB) has no impact on daily volatility. But the USD has a negative impact on daily realized volatility. In the weekly and monthly model, the search indexes all perform significantly to the volatility. This research would help the investor to identify more impacts factor to the exchange rate market.

Copyright

© 2021 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article under the CC BY-NC license.

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TY  - CONF
AU  - Zhao Wang
PY  - 2021
DA  - 2021/12/15
TI  - Using Search Index to Predict the Volatility of Exchange Rate Based on HAR Model
BT  - Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)
PB  - Atlantis Press
SP  - 2785
EP  - 2789
SN  - 2352-5428
UR  - https://doi.org/10.2991/assehr.k.211209.453
DO  - 10.2991/assehr.k.211209.453
ID  - Wang2021
ER  -