Following a dramatic collapse of a fixed exchange rate based inflation stabilization program, Turkey moved into a free floating exchange rate system in February 2001. In this paper, an asymmetric stochastic volatility model of the foreign exchange rate in Turkey is estimated for the floating...

Do all investor types contribute equally to volatility formation? Although stock volatility should ideally originate only from fundamental innovations, it is embedded into prices through the trading process. We compare the relative contributions of trading by local institutions, local...

This paper examines changes in market quality resulting from the smaller tick size of the interbank foreign exchange market. Coupled with the lower tick size, the special composition of traders and their order placement strategies created a suitable environment for high- frequency traders...

This paper presents an empirical investigation of scaling and multifractal properties of US Dollar–Deutschemark (USD–DEM) returns. The data set is ten years of 5-min returns. The cumulative return distributions of positive and negative tails at different time intervals are linear in the...

The asset allocation decision often relies upon correlation estimates arising from short-run data. Short-run correlation estimates may, however, be distorted by frictions. In this paper, we introduce a long-run wavelet-based correlation estimator, distinguishing between long-run common behavior...

In this study we examine the rationale behind informed traders decision to speculate on the volatility of the common stock by trading in the derivative or in the cash markets. Using a continuous-time trading model, we demonstrate that the quality of the private information regarding the...