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
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
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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