TY  - JOUR
AU  - Andersen,Torben G.
AU  - Bollerslev,Tim
AU  - Diebold,Francis X.
AU  - Labys,Paul
TI  - Exchange Rate Returns Standardized by Realized Volatility are (Nearly) Gaussian
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7488
PY  - 2000
Y2  - January 2000
UR  - http://www.nber.org/papers/w7488
L1  - http://www.nber.org/papers/w7488.pdf
N1  - Author contact info:
Torben G. Andersen
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL  60208
Tel: 847/467-1285
Fax: 847/491-5719
E-Mail: t-andersen@kellogg.northwestern.edu

Tim Bollerslev
Department of Economics
Duke University
Box 90097
Durham, NC 27708-0097
Tel: 919/660-1846
Fax: 919/684-8974
E-Mail: boller@econ.duke.edu

Francis X. Diebold
Department of Economics
University of Pennsylvania
3718 Locust Walk
Philadelphia, PA  19104-6297
Tel: 215/898-1507
Fax: 212/573-4217
E-Mail: fdiebold@sas.upenn.edu

Paul Labys
Dept. of Economics
University of Pennsylvania
3718 Locust Walk
Philadelphia, PA 19104-6297
E-Mail: plabys@crai.com
AB  - It is well known that high-frequency asset returns are fat-tailed relative to the Gaussian distribution tails are typically reduced but not eliminated when returns are standardized by volatilities estimated from popular models such as GARCH.  We consider two major dollar exchange rates, and we show that returns standardized instead by the realized volatilities of Andersen, Bollerslev, Diebold and Labys (1999) are very nearly Gaussian.  We perform both univariate and multivariate analyses, we trace the different effects of the different standardizations to differences in information sets, and we draw implications for the presence of jumps in exchange rate diffusions.
ER  -