Different Strokes for Different Folks: Long Memory and Roughness

Shuping Shi and Jun Yu

No 7-2021, Economics and Statistics Working Papers from Singapore Management University, School of Economics

Abstract: The log realized volatility of financial assets is often modeled as an autoregressive fractionally integrated moving average model (ARFIMA) process, denoted by ARFIMA(p, d, q), with p = 1 and q = 0. Two conflicting results have been found in the literature regarding the dynamics. One stream shows that the data series has a long memory (i.e., the fractional parameter d > 0) with strong mean reversion (i.e., the autoregressive coefficient |α1| ≈ 0). The other stream suggests that the volatil-ity is rough (i.e., d

Keywords: Long memory; fractional integration; roughness; short-run dynamics; realized volatility (search for similar items in EconPapers)
JEL-codes: C15 C22 C32 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2021-08-03
New Economics Papers: this item is included in nep-ets, nep-isf and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:ris:smuesw:2021_007

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