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Structural Change and long memory in the GARCH(1,1)-model

Baudouin Tameze Azamo and Walter Krämer ()

No 2006,33, Technical Reports from Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen

Abstract: It has long been known that the estimated persistence parameter in the GARCH(1,1) - model is biased upwards when the parameters of the model are not constant throughout the sample. The present paper explains the mechanics of this behavior for a particular class of estimates of the model parameters. It gives sufficient conditions for the estimated persistence to tend to one when the mean of the process changes, both for a given sample size (as the size of the structural change increases), and as sample size increases, extending previous results that were concerned with changes in the volatility parameters.

Keywords: structural change; long memory; GARCH (search for similar items in EconPapers)
Date: 2006
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