Long memory in the volatility of the Australian All Ordinaries Index and the Share Price Index futures

Jonathan Dark ()

No 5/04, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: This paper tests for long memory in the volatility of the All Ordinaries Index and its Share Price Index (SPI) futures. This has important implications for those agents concerned with the long term volatility in these markets. We use daily data and a short span of high frequency data to estimate the fractional differencing parameter, examine the fit of the implied autocorrelation function, and calculate the modified R/S and KPSS test statistics. All procedures support the existence of long memory in volatility in both markets except the KPSS test on the index using daily data. We argue that this is due to the low power of the KPSS test.

Keywords: long memory; modified R/S statistic; KPSS statistic; intraday periodicity in volatility. (search for similar items in EconPapers)
JEL-codes: C14 G15 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2004-03
New Economics Papers: this item is included in nep-ets, nep-fin, nep-fmk and nep-rmg
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