Mm. Dacorogna et al., A GEOGRAPHICAL MODEL FOR THE DAILY AND WEEKLY SEASONAL VOLATILITY IN THE FOREIGN-EXCHANGE MARKET, Journal of international money and finance, 12(4), 1993, pp. 413-438
The daily and weekly seasonality of foreign exchange volatility is mod
eled by introducing an activity variable. This activity is explained b
y a simple model of the changing and sometimes overlapping market pres
ence of geographical components (East Asia, Europe, and America). Inte
grating this activity over time results in the new 9 time scale, chara
cterized by non-seasonal volatility. This scale, applied to dense data
streams of absolute price changes, succeeds in removing most of the se
asonal heteroscedasticity in an autocorrelation study. Unexpectedly, t
he positive autocorrelation is found to decline hyperbolically rather
than exponentially as a function of the lag.