Volatility Dynamics in Foreign Exchange Rates: Further Evidence from Malaysian Ringgit and Singapore Dollar

The volatility dynamics of foreign exchanges have been the focus of research since Bollerslev’s (1986) seminal work on the generalized autoregressive conditional heteroscedasticity (GARCH) modelling. Several well-established empirical regularities may be highlighted as follows: [a] evidence of volatility clustering is detected in the exchange rates returns; [b] asymmetric effects in exchange rate volatility are not common; and [c] exchange rate volatility may display significant persistence and dependence between observations. Among others, Franses and van Dijk (2000) provide an in-depth review of this subject and illustrate the importance of capturing conditional variance using GARCH-type models in the empirical finance research.