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Exploratory Data Analysis of Yen Exchange Rates: ARMA and GARCH Modeling Insights

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This report presents an extensive exploratory data analysis of the Yen to Dollar exchange rate, utilizing monthly data from 1971 to the present. Through 387 observations, various modeling techniques, including ARMA and ARCH-GARCH, were employed to assess and forecast fluctuations in exchange rates. Our findings indicate a relatively flat forecast for fractional changes in the ¥/$ over the coming twelve months. The model's second iteration, accounting for high-variance periods, shows stronger reliability. For further inquiries or clarifications, please reach out.

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Exploratory Data Analysis of Yen Exchange Rates: ARMA and GARCH Modeling Insights

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  1. Ying & Yen Carson Marries Anthony Mader Mickey Sun Edgar Torres Alex Vicente

  2. Ying & Yen Carson Moko Anthony Kamakazi Mickey Sumimato Edgar Terriaki Alex Yamamuchi

  3. Data • From 1971 to Present (Monthly) • 387 Observations • Federal Reserve Bank St Louis (Fred)

  4. Exploratory Data Analysis

  5. Exploratory Data Analysis

  6. Exploratory Data Analysis

  7. Exploratory Data Analysis

  8. Breaking Yen into Change $ • Ln, Difference • Fractional Change • Pre-Whitening

  9. Breaking Yen into Change $

  10. Breaking Yen into Change $

  11. Breaking Yen into Change $

  12. Modeling ARMA

  13. Modeling ARMA

  14. Residual^2 • Checking Periods of High Variance

  15. Residual^2

  16. ARCH - GARCH

  17. ARCH - GARCH

  18. Residual Squared of the ARCH-GARCH Model

  19. Forecast Yen Exchange ARMA- Forecast ARMA with ARCH-GARCH Forecast

  20. Conclusion • Our model forecasts a relatively flat fractional change in the ¥/$ over the next twelve months. • We have more confidence in our second model because the ARCH-GARCH terms account for periods of high variance.

  21. Questions?

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