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Identification of long memory in GARCH models

Author

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  • Massimiliano Caporin

    (Universitá Ca’ Foscari di Venezia
    GRETA)

Abstract

. Abstract: This work extends the analysis of Baillie, Bollerslev and Mikkelsen (1996) and Bollerslev and Mikkelsen (1996) on the estimation and identification problems of the Fractionally Integrated Generalized Autoregressive Conditional Heteroskedastik (FIGARCH) model. We assess the power of different information criteria and tests in identifying the presence of long memory in the conditional variances. The analysis is performed with a Montecarlo simulation study. In detail, the focus on the Akaike, Hannan-Quinn, Shibata and Schwarz information criteria and on the Jarque-Bera test for normality, Box-Pierce test for residual correlation and Engle test for ARCH effects. This study verifies that information criteria clearly distinguish the presence of long memory while tests do not evidence any difference between the fitted long and short memory models. An empirical application is provided; it analyses, on a high frequency dataset, the returns of the FIB30, the future on the MIB30, the Italian stock market index of highly capitalized firms.

Suggested Citation

  • Massimiliano Caporin, 2003. "Identification of long memory in GARCH models," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 12(2), pages 133-151, December.
    • Handle: RePEc:spr:stmapp:v:12:y:2003:i:2:d:10.1007_s10260-003-0056-0
    DOI: 10.1007/s10260-003-0056-0
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    Cited by:

    1. Charles, Amélie & Darné, Olivier, 2014. "Volatility persistence in crude oil markets," Energy Policy, Elsevier, vol. 65(C), pages 729-742.
    2. Conrad, Christian & Karanasos, Menelaos & Zeng, Ning, 2011. "Multivariate fractionally integrated APARCH modeling of stock market volatility: A multi-country study," Journal of Empirical Finance, Elsevier, vol. 18(1), pages 147-159, January.
    3. repec:awi:wpaper:0472 is not listed on IDEAS
    4. Trino-Manuel Ñíguez, 2008. "Volatility and VaR forecasting in the Madrid Stock Exchange," Spanish Economic Review, Springer;Spanish Economic Association, vol. 10(3), pages 169-196, September.
    5. J. Kim & A. Kartsaklas & M. Karanasos, 2005. "The volume–volatility relationship and the opening of the Korean stock market to foreign investors after the financial turmoil in 1997," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 12(3), pages 245-271, September.

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