Estimating daily seasonality in foreign exchange rate changes

Combining time- and frequency-domain analysis demonstrates considerable improvement in modelling seasonal patterns in daily exchange rate changes. A high-pass filter in the frequency domain is used, followed by the usual time-domain analysis with GARCH models, to estimate day-of-the-week effects in the spot returns on five exchanges against U.S. dollars and the results are seen to compare favourably with those from a pure time-domain GARCH approach