Bivariate FIGARCH and Fractional Cointegration
AbstractWe consider the modelling of volatility on closely related markets. Univariate fractional volatility (FIGARCH) models are now standard, as are multivariate GARCH models. In this paper we adopt a combination of the two methodologies. There is as yet little consensus on the methodology for testing for fractional cointegration. The contribution of this paper is to demonstrate the feasibility of estimating and testing cointegrated bivariate FIGARCH models. We apply these methods to volatility on the NYMEX and IPE crude oil markets. We find a common order of fractional integration for the two volatility processes and confirm that they are fractionally cointegrated. An estimated error correction FIGARCH model indicates that the preponderant adjustment is of the IPE towards NYMEX.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 408.
Date of creation: Dec 1999
Date of revision:
FIGARCH; Fractional Cointegration; ECM;
Find related papers by JEL classification:
- G0 - Financial Economics - - General
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
- C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-01-07 (All new papers)
- NEP-ECM-2000-01-07 (Econometrics)
- NEP-ETS-2000-01-07 (Econometric Time Series)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Shimotsu, Katsumi, 2007.
"Gaussian semiparametric estimation of multivariate fractionally integrated processes,"
Journal of Econometrics,
Elsevier, vol. 137(2), pages 277-310, April.
- Katsumi Shimotsu, 2006. "Gaussian Semiparametric Estimation of Multivariate Fractionally Integrated Processes," Working Papers 1062, Queen's University, Department of Economics.
- Katsumi Shimotsu, 2003. "Gaussian semiparametric estimation of multivariate fractionally integrated processes," Economics Discussion Papers 571, University of Essex, Department of Economics.
- Kin-Yip Ho & Albert K Tsui, 2008.
"Volatility Dynamics in Foreign Exchange Rates : Further Evidence from the Malaysian Ringgit and Singapore Dollar,"
Finance Working Papers
22571, East Asian Bureau of Economic Research.
- Kin-Yip Ho & Albert K Tsui, 2008. "Volatility Dynamics in Foreign Exchange Rates: Further Evidence from the Malaysian Ringgit and Singapore Dollar," SCAPE Policy Research Working Paper Series 0805, National University of Singapore, Department of Economics, SCAPE.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nick Vriend).
If references are entirely missing, you can add them using this form.