Research On The Impact Of Major Events On Foreign Exchange Market Return

In recent years,major global events become more frequent,triggering financial market volatility.Financial market is the core of modern economic society.The stability of the financial system is related to the safety of the whole country and region.With the expansion of global marketization and closer trade between countries,the foreign exchange market fluctuations affect each country.The volatility of the exchange rate is often caused by the occurrence of major events,and thus spreads to all walks of life.Therefore,the research on the impact of major events on the foreign exchange market return,the impact of major events on foreign exchange market return volatility,both for investors and the authorities have a strong practical significance.The research content of this paper has mainly two aspects.First,this paper uses the method for detecting outliers based on ARIMA intervention model.Through the method for detecting outliers,the types and processes of the impact of major events on the foreign exchange market are objectively defined.At the same time,different spans time windows are selected to do robustness test.Secondly,according to the results of detecting outliers,divide into three periods effectively,which include the period before the impact of event,during the impact,and after the impact.The three-regime GARCH model with structural change is constructed by introducing the structural change points,which are choosed by the method for detecting outliers.The change of the volatility of the foreign exchange market return is analyzed by comparing the goodness of fit of GARCH model and the three-regime GARCH model with structural change.We also construct the GARCH model with structural change by selecting the structural change points in the subjective sense.A more optimal model is selected,comparing the goodness of fit and the forecasting effect of the GARCH model with structural change which are constructed under the two methods of selection structural change points.This paper examines the United Kingdom's withdrawal from the European Union.For the purposes of the analysis that follows,30-mimute interval data of five major bilateral exchange rates(GBP/USD,EUR/USD,JPY/USD,CHF/USD,CNH/USD)are used.The results of the study show that major events do have a huge impact on the foreign exchange market return,and the impact type is continuous.Impact usually occurs in the course of events.The market in advance of the event makes a pre-judgment,which causes market volatility.What is more,Major events will lead to changes in the volatility of the foreign exchange market return,and the volatility in the process of event is much higher than before and after the event.Using the traditional GARCH model to analyze the foreign exchange market which is affected by Major events will cause spurious persistence.Thus using the GARCH model with structural change to study the impact of major events on the volatility of the foreign exchange market return is more scientific and effective.Empirical result shows that the three-regime GARCH model with structural change constructed by detecting outliers as structural change points outperforms the GARCH.model with structural change by selecting the structural change points in the subjective sense both in the goodness of fit and the forecasting effect.