Non-stationarities in financial time series, the long range dependence and the IGARCH effects

Thomas Mikosch and Catalin Starica ()
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Thomas Mikosch: Dept. Actuarial Mathematics, University of Copenhagen

Econometrics from EconWPA

Abstract: In this paper we give the theoretical basis of a possible explanation for two stylized facts observed in long log-return series: the long range dependence (LRD) in volatility and the integrated GARCH (IGARCH). Both these effects can be theoretically explained if one assumes that the data is non-stationary (changing unconditional variance).

Keywords: Sample ACF; Garch process; long range dependence; IGARCH; non- stationarities; time-varying unconditional variance (search for similar items in EconPapers)
JEL-codes: C22 C52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin
Date: 2004-12-08
Note: Type of Document - pdf; pages: 19
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpem:0412005

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