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ARCH and GARCH models vs. martingale volatility of finance market returns

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Author Info
McCauley, Joseph L.
Abstract

ARCH and GARCH models assume either i.i.d. or [`]white noise' as is usual in regression analysis, while also assuming memory in a conditional mean square fluctuation with stationary increments. We will show that ARCH/GARCH is inconsistent with uncorrelated increments, violating the i.i.d. and [`]white' assumptions, and violating finance data and the efficient market hypothesis as well.

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File URL: http://www.sciencedirect.com/science/article/B6W4W-4WGF17G-1/2/c3c505ae4c7adb538dffd3facec5377f
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Publisher Info
Article provided by Elsevier in its journal International Review of Financial Analysis.

Volume (Year): 18 (2009)
Issue (Month): 4 (September)
Pages: 151-153
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Handle: RePEc:eee:finana:v:18:y:2009:i:4:p:151-153

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Web page: http://www.elsevier.com/locate/inca/620166

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Related research
Keywords: Nonstationary differences/increments ARCH GARCH Martingales Efficient market hypothesis Volatility;

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This page was last updated on 2009-12-30.

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