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Long memory in the volatility of the Australian All Ordinaries Index and the Share Price Index futures

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  • Jonathan Dark

Abstract

This paper tests for long memory in the volatility of the All Ordinaries Index and its Share Price Index (SPI) futures. This has important implications for those agents concerned with the long term volatility in these markets. We use daily data and a short span of high frequency data to estimate the fractional differencing parameter, examine the fit of the implied autocorrelation function, and calculate the modified R/S and KPSS test statistics. All procedures support the existence of long memory in volatility in both markets except the KPSS test on the index using daily data. We argue that this is due to the low power of the KPSS test.

Suggested Citation

  • Jonathan Dark, 2004. "Long memory in the volatility of the Australian All Ordinaries Index and the Share Price Index futures," Monash Econometrics and Business Statistics Working Papers 5/04, Monash University, Department of Econometrics and Business Statistics.
    • Handle: RePEc:msh:ebswps:2004-5
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    File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2004/wp5-04.pdf
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    long memory; modified R/S statistic; KPSS statistic; intraday periodicity in volatility.;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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