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Periodic Long-Memory GARCH Models

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Author Info

  • Silvano Bordignon
  • Massimiliano Caporin
  • Francesco Lisi

Abstract

A distinguishing feature of the intraday time-varying volatility of financial time series is given by the presence of long-range dependence of periodic type, due mainly to time-of-the-day phenomena. In this work, we introduce a model able to describe the empirical evidence given by this periodic long-memory behaviour. The model, named PLM-GARCH (Periodic Long-Memory GARCH), represents a natural extension of the FIGARCH model proposed for modelling long-range persistence of volatility. Periodic long memory versions of EGARCH (PLM-EGARCH) and of Log-GARCH (PLM-LGARCH) models are also examined. Some properties and characteristics of the models are given and finite sample performance of quasi-maximum likelihood estimation are studied with Monte Carlo simulations. Further possible extensions of the model to take into account multiple sources of periodic long-memory behaviour are proposed. Two empirical applications on intra-day financial time series are also provided.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/07474930802387860
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Econometric Reviews.

Volume (Year): 28 (2009)
Issue (Month): 1-3 ()
Pages: 60-82

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Handle: RePEc:taf:emetrv:v:28:y:2009:i:1-3:p:60-82

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Related research

Keywords: GARCH models; Intra-day volatility; Long-memory; Periodicity;

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Cited by:
  1. Massimiliano Caporin & Francesco Lisi, 2010. "Misspecification tests for periodic long memory GARCH models," Statistical Methods and Applications, Springer, vol. 19(1), pages 47-62, March.
  2. Caporin, Massimiliano & Ranaldo, Angelo & Velo, Gabriel G., 2014. "Precious Metals Under the Microscope: A High-Frequency Analysis," Working Papers on Finance 1409, University of St. Gallen, School of Finance.
  3. Caporin, Massimiliano & Ranaldo, Angelo & Velo, Gabriel G., 2013. "Stylized Facts and Dynamic Modeling of High-frequency Data on Precious Metals," Working Papers on Finance 1318, University of St. Gallen, School of Finance.
  4. Caporin, Massimiliano & Pres, Juliusz & Torro, Hipolit, 2010. "Model based Monte Carlo pricing of energy and temperature quanto options," MPRA Paper 25538, University Library of Munich, Germany.

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