INTEGRATED MARKOV-SWITCHING GARCH PROCESS

Liu, Ji-Chun

Econometric Theory, 2009, vol. 25, issue 05, pages 1277-1288

Abstract: This paper investigates stationarity of the so-called integrated Markov-switching generalized autoregressive conditionally heteroskedastic (GARCH) process, which is an important subclass of the Markov-switching GARCH process introduced by Francq, Roussignol, and Zako 220) and a Markov-switching version of the integrated GARCH (IGARCH) process. We show that, like the classical IGARCH process, a stationary solution with infinite variance for the integrated Markov-switching GARCH process may exist. To this purpose, an alternative condition for the existence of a strictly stationary solution of the Markov-switching GARCH process is presented, and some results obtained in Hennion (1997, Annals of Probability 25, 1545 1587) are employed. In addition, we also discuss conditions for the existence of a strictly stationary solution of the Markov-switching GARCH process with finite variance, which is a modification of Theorem 2 in Francq et al. (2001).

Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:cup:etheor:v:25:y:2009:i:05:p:1277-1288_09

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