PREDICTABILITY OF MAJOR SWEDISH EXCHANGE RATES
AbstractThis paper investigates the predictability of weekly percentage changes in exchange rates for Swedish currency-Swedish krona with respect to the currency of major trading partners - namely Danish Krone of Denmark, Norwegian Krone of Norway, US Dollar of United States, UK Pound of United Kingdom and Euro of Germany and Finland. The Exponential GARCH-in-mean (EGARCH) model is used in this study along with a Generalized Error Distribution to allow for variable kurtosis in the data. Percentage changes in the Swedish krona with respect to all partners’ currencies are serially correlated - that is there is a significant first-moment dependency of each exchange rate series. Squared exchange rates for all series also have serial correlation indicating the presence of conditional heteroskedasticity.
The series also exhibits opposing movements in order to maintain an orderly market. Conditional mean is not affected by conditional volatility. However, news about volatility from the previous period has explanatory power on current volatility. With respect to Danish Krone and Eurozone Euro, unexpected depreciation or negative shocks of Swedish Krona implies a higher next period conditional variance than its appreciation or positive shocks of the same magnitude. On the other hand, with respect to Norwegian Krone, US Dollar and UK Pound unexpected depreciations or appreciations of Swedish Krona have a symmetric impact on volatility.
The Copyright Transfer Form to ASERS Publishing (The Publisher)
This form refers to the manuscript, which an author(s) was accepted for publication and was signed by all the authors.
The undersigned Author(s) of the above-mentioned Paper here transfer any and all copyright-rights in and to The Paper to The Publisher. The Author(s) warrants that The Paper is based on their original work and that the undersigned has the power and authority to make and execute this assignment. It is the author's responsibility to obtain written permission to quote material that has been previously published in any form. The Publisher recognizes the retained rights noted below and grants to the above authors and employers for whom the work performed royalty-free permission to reuse their materials below. Authors may reuse all or portions of the above Paper in other works, excepting the publication of the paper in the same form. Authors may reproduce or authorize others to reproduce the above Paper for the Author's personal use or for internal company use, provided that the source and The Publisher copyright notice are mentioned, that the copies are not used in any way that implies The Publisher endorsement of a product or service of an employer, and that the copies are not offered for sale as such. Authors are permitted to grant third party requests for reprinting, republishing or other types of reuse. The Authors may make limited distribution of all or portions of the above Paper prior to publication if they inform The Publisher of the nature and extent of such limited distribution prior there to. Authors retain all proprietary rights in any process, procedure, or article of manufacture described in The Paper. This agreement becomes null and void if and only if the above paper is not accepted and published by The Publisher, or is with drawn by the author(s) before acceptance by the Publisher.