Long memory in log-range series: Do structural breaks matter?

Vasiliki Chatzikonstanti and Ioannis Venetis ()

Journal of Empirical Finance, 2015, vol. 33, issue C, 104-113

Abstract: This paper examines whether the observed long memory behavior of log-range series is to some extent spurious and whether it can be explained by the presence of structural breaks. Utilizing stock market data we show that the characterization of log-range series as long memory processes can be a strong assumption. Moreover, we find that all examined series experience a large number of significant breaks. Once the breaks are accounted for, the volatility persistence is eliminated. Overall, the findings suggest that volatility can be adequately represented, at least in-sample, through a multiple breaks process and a short run component.

Keywords: Structural breaks; Long memory; Log-range volatility proxy; Stock market (search for similar items in EconPapers)
JEL-codes: C22 C58 G10 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:33:y:2015:i:c:p:104-113

DOI: 10.1016/j.jempfin.2015.06.003

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