Testing for time-varying long-range dependence in volatility for emerging markets

Daniel Cajueiro and Benjamin Tabak

Physica A: Statistical Mechanics and its Applications, 2005, vol. 346, issue 3, 577-588

Abstract: This paper tests whether volatility for equity returns for emerging markets possesses long-range dependence. Furthermore, the assertion of whether long-range dependence is time-varying is checked through a rolling sample approach. The empirical results suggest that there exists long-range dependence in emerging equity returns' volatility and also that it is time-varying. This assertion also holds true for Japan and the US, which are considered more developed markets. Moreover, these results are robust to “shuffling” the data to eliminate short-term autocorrelation. Therefore, they suggest that the class of GARCH processes, which are currently employed to analyze volatility of financial time series, is misspecified.

Keywords: Emerging markets; Hurst exponent; Long-range dependence; Volatility (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (71)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:346:y:2005:i:3:p:577-588

DOI: 10.1016/j.physa.2004.08.030

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