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Long memory in the volatility of the Australian All Ordinaries Index and the Share Price Index futures

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  • Jonathan Dark

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    Abstract

    This paper tests for long memory in the volatility of the All Ordinaries Index and its Share Price Index (SPI) futures. This has important implications for those agents concerned with the long term volatility in these markets. We use daily data and a short span of high frequency data to estimate the fractional differencing parameter, examine the fit of the implied autocorrelation function, and calculate the modified R/S and KPSS test statistics. All procedures support the existence of long memory in volatility in both markets except the KPSS test on the index using daily data. We argue that this is due to the low power of the KPSS test.

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    File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2004/wp5-04.pdf
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    Bibliographic Info

    Paper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 5/04.

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    Length: 51 pages
    Date of creation: Mar 2004
    Date of revision:
    Handle: RePEc:msh:ebswps:2004-5

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    Keywords: long memory; modified R/S statistic; KPSS statistic; intraday periodicity in volatility.;

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