MODELLING STOCHASTIC VOLATILITY IN ASSET RETURNS USING FRACTIONALLY INTEGRATED SEMIPARAMETRIC TECHNIQUES

Guglielmo Maria Caporale and Luis Gil-Alana

Economics and Finance Discussion Papers from Economics and Finance Section, School of Social Sciences, Brunel University

Abstract: In this article we estimate the order of integration of the volatility process of several exchange rates and stock returns using fractionally integrated semiparametric techniques,namely a local Whittle semiparametric estimator. The results suggest that all series can be well described in terms of I(d) statistical models, with values of d higher than 0, indicating long-memory behaviour.

Pages: 9 pages
Date: 2005-06
New Economics Papers: this item is included in nep-cfn, nep-ets, nep-fmk and nep-sea
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