Non-stationarities in financial time series, the long range dependence and the IGARCH effects
In this paper we give the theoretical basis of a possible explanation for two stylized facts observed in long log-return series: the long range dependence (LRD) in volatility and the integrated GARCH (IGARCH). Both these effects can be theoretically explained if one assumes that the data is non-stationary (changing unconditional variance).
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