This paper introduces a new long memory volatility process, denoted by adaptive FIGARCH, or A-FIGARCH, which is designed to account for both long memory and structural change in the conditional variance process. Structural change is modeled by allowing the intercept to follow the smooth flexible functional form due to Gallant (1984. The Fourier flexible form. American Journal of Agricultural Economics 66, 204-208). A Monte Carlo study finds that the A-FIGARCH model outperforms the standard FIGARCH model when structural change is present, and performs at least as well in the absence of structural instability. An empirical application to stock market volatility is also included to illustrate the usefulness of the technique. © 2009 Elsevier B.V. All rights reserved.

Morana, C. (2009). Modeling Long Memory and Structural Breaks in Conditional Variances: An Adaptive FIGARCH Approach. JOURNAL OF ECONOMIC DYNAMICS & CONTROL, 33(8), 1577-1592 [10.1016/j.jedc.2009.02.009].

Modeling Long Memory and Structural Breaks in Conditional Variances: An Adaptive FIGARCH Approach

MORANA, CLAUDIO
2009

Abstract

This paper introduces a new long memory volatility process, denoted by adaptive FIGARCH, or A-FIGARCH, which is designed to account for both long memory and structural change in the conditional variance process. Structural change is modeled by allowing the intercept to follow the smooth flexible functional form due to Gallant (1984. The Fourier flexible form. American Journal of Agricultural Economics 66, 204-208). A Monte Carlo study finds that the A-FIGARCH model outperforms the standard FIGARCH model when structural change is present, and performs at least as well in the absence of structural instability. An empirical application to stock market volatility is also included to illustrate the usefulness of the technique. © 2009 Elsevier B.V. All rights reserved.
Articolo in rivista - Articolo scientifico
FIGARCH; long memory; structural change; stock market volatility
English
2009
33
8
1577
1592
none
Morana, C. (2009). Modeling Long Memory and Structural Breaks in Conditional Variances: An Adaptive FIGARCH Approach. JOURNAL OF ECONOMIC DYNAMICS & CONTROL, 33(8), 1577-1592 [10.1016/j.jedc.2009.02.009].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/26030
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