Regime Switching in Volatility and the Test of the Long Memory Property
| Autor: | Chun-Kuei Hsieh, 謝俊魁 |
|---|---|
| Rok vydání: | 1999 |
| Druh dokumentu: | 學位論文 ; thesis |
| Popis: | 87 The strong persistence in the volatility of a variety of financial time series is well-known. To determine whether this persistence can be characterized as ''long memory'''' is obviously important in both financial and econometric modelling. In this paper, after summarizing Hamilton and Susmel''s (1994) regime switching SWARCH model and BBM (1996) and Chung''s (1998) long memory FIGARCH for volatility, I propose a general SW(k)-FIGARCH-L(0,d,0) model that allows the estimation of both regime switching parameters and the long memory parameter. In such a framework I am able to test whether the volatility still has long memory after regime switching has been considered and I show that regime switching in volatility can result in spurious long memory. Furthermore, I find the proposed model also solves one of the problems with the standard SWARCH model that squared residuals obtained from the SWARCH model estimation usually are highly correlated, which implies the simple regime switching mechanism is not able to characterize all the dynamics in volatility. Based on these encouraging results, I believe the proposed model is a promising tool in analyzing financial data. My empirical analysis of the Taiex data shows that the long memory in their volatility will reduce to intermediate memory after regime switching is considered, which represents an interesting example of the spurious long memory in volatility that caused by the regime switching. |
| Databáze: | Networked Digital Library of Theses & Dissertations |
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