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Spurious persistence in stochastic volatility

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  • Messow, Philip
  • Krämer, Walter

Abstract

We show that structural changes in stochastic volatility models induce spurious persistence. Other than in GARCH-type models, implied persistence does not tend to unity with given size of the structural change and increasing sample size.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 121 (2013)
Issue (Month): 2 ()
Pages: 221-223

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Handle: RePEc:eee:ecolet:v:121:y:2013:i:2:p:221-223

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Persistence; Stochastic volatility; Structural change;

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References

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  1. Lamoureux, Christopher G & Lastrapes, William D, 1990. "Persistence in Variance, Structural Change, and the GARCH Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 225-34, April.
  2. Kramer, Walter & Azamo, Baudouin Tameze, 2007. "Structural change and estimated persistence in the GARCH(1,1)-model," Economics Letters, Elsevier, vol. 97(1), pages 17-23, October.
  3. Harvey, Andrew & Ruiz, Esther & Shephard, Neil, 1994. "Multivariate Stochastic Variance Models," Review of Economic Studies, Wiley Blackwell, vol. 61(2), pages 247-64, April.
  4. Hillebrand, Eric, 2005. "Neglecting parameter changes in GARCH models," Journal of Econometrics, Elsevier, vol. 129(1-2), pages 121-138.
  5. Thomas Mikosch & Cătălin Stărică, 2004. "Nonstationarities in Financial Time Series, the Long-Range Dependence, and the IGARCH Effects," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 378-390, February.
  6. Zacharias Psaradakis & Elias Tzavalis, 1999. "On regression-based tests for persistence in logarithmic volatility models," Econometric Reviews, Taylor & Francis Journals, vol. 18(4), pages 441-448.
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