Nonstationarities in Financial Time Series, the Long-Range Dependence, and the IGARCH Effects

Thomas Mikosch and Cătălin Stărică
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Thomas Mikosch: University of Copenhagen
Cătălin Stărică: Chalmers University of Technology

The Review of Economics and Statistics, 2004, vol. 86, issue 1, 378-390

Abstract: 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 explained theoretically if one assumes that the data are nonstationary. 2004 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2004
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