Strict stationarity, persistence and volatility forecasting in ARCH(∞) processes

James Davidson and Xiaoyu Li

Journal of Empirical Finance, 2016, vol. 38, issue PB, 534-547

Abstract: This paper derives a simple sufficient condition for strict stationarity in the ARCH(∞) class of processes with conditional heteroscedasticity. The concept of persistence in these processes is explored, and is the subject of a set of simulations showing how persistence depends on both the pattern of lag coefficients of the ARCH model and the distribution of the driving shocks. The results are used to argue that an alternative to the usual method of ARCH/GARCH volatility forecasting should be considered.

Keywords: GARCH; FIGARCH; Conditional heteroscedasticity; Stationarity; Persistence; Forecasting (search for similar items in EconPapers)
JEL-codes: C53 C58 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:38:y:2016:i:pb:p:534-547

DOI: 10.1016/j.jempfin.2015.08.010

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