This article shows how IGARCH effects can arise as an artifact of unaccounted structural change. Using daily returns for the DM/US$ and Yen/US$ exchange rates, the finding is shown to have empirical relevance. GARCH models appear to be useful approximations, for short-term forecasting, to a date generating process that shows time varying conditional variance due to switching heteroscedasticity.
Morana, C. (2002). Igarch effects: an interpretation. APPLIED ECONOMICS LETTERS, 9(11), 745-748 [10.1080/13504850210127254].
Igarch effects: an interpretation
Morana, C
2002
Abstract
This article shows how IGARCH effects can arise as an artifact of unaccounted structural change. Using daily returns for the DM/US$ and Yen/US$ exchange rates, the finding is shown to have empirical relevance. GARCH models appear to be useful approximations, for short-term forecasting, to a date generating process that shows time varying conditional variance due to switching heteroscedasticity.
File in questo prodotto:
Non ci sono file associati a questo prodotto.
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
