Structural change and estimated persistence in the GARCH(1,1)-model

Walter Krämer and Baudouin Tameze ()
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Baudouin Tameze: Faculty of Statistics, Dortmund University of Technology

Working Papers from Business and Social Statistics Department, Technische Universität Dortmund

Abstract: It has long been known that the estimated persistence parameter in the GARCH(1,1) - model is biased upwards when the parameters of the model are not constant throughout the sample. The present paper explains the mechanics of this behavior for a particular class of estimates of the model parameters and for a particular type of structural change. It shows for any given sample size that the estimated persistence must tend to one in probability if the structural change is ignored and large enough.

Keywords: long memory; GARCH; structural change (search for similar items in EconPapers)
Pages: 16 pages
Date: 2006-05
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (1)

Published in Economics Letters, October 2007, pages 17-23

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Journal Article: Structural change and estimated persistence in the GARCH(1,1)-model (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:dor:wpaper:5

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