Can GARCH-class models capture long memory in WTI crude oil markets?

Yudong Wang, Chongfeng Wu and Y Wei

Economic Modelling, 2011, vol. 28, issue 3, 921-927

Abstract: This paper investigates the issue whether GARCH-type models can well capture the long memory widely existed in the volatility of WTI crude oil returns. In this frame, we model the volatility of spot and futures returns employing several GARCH-class models. Then, using two non-parametric methods, detrended fluctuation analysis (DFA) and rescaled range analysis (R/S), we compare the long memory properties of conditional volatility series obtained from GARCH-class models to that of actual volatility series. Our results show that GARCH-class models can well capture the long memory properties for the time scale larger than a year. However, for the time scale smaller than a year, the GARCH-class models are misspecified.

Keywords: Crude; oil; markets; GARCH-class; models; Detrended; fluctuation; analysis; Rescaled; range; analysis; Long; memory (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

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