A common feature of financial time series is their strong persistence. Yet, long memorymay just be the spurious effect of either structural breaks or slow switching regimes.We explore the effects of spurious long memory on the elasticity of the stock market pricewith respect to volatility and show how cross-sectional aggregation may generate spuriouspersistence in the data. We undertake an extensive Monte Carlo study to compare theperformances of five tests, constructed under the null of true long memory versus thealternative of spurious long memory due to level shifts or breaks.
True Vs Spurious Long Memory: Some Theoretical Results And A Monte Carlo Comparison
LECCADITO, ARTURO;
2015-01-01
Abstract
A common feature of financial time series is their strong persistence. Yet, long memorymay just be the spurious effect of either structural breaks or slow switching regimes.We explore the effects of spurious long memory on the elasticity of the stock market pricewith respect to volatility and show how cross-sectional aggregation may generate spuriouspersistence in the data. We undertake an extensive Monte Carlo study to compare theperformances of five tests, constructed under the null of true long memory versus thealternative of spurious long memory due to level shifts or breaks.File in questo prodotto:
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