A common feature of financial time series is their strong persistence. Yet, long memory may 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 price with respect to volatility and show how cross-sectional aggregation may generate spurious persistence in the data. We undertake an extensive Monte Carlo study to compare the performances of five tests, constructed under the null of true long memory versus the alternative of spurious long memory due to level shifts or breaks.

True versus spurious long memory: some theoretical results and a Monte Carlo comparison

URGA, Giovanni
2015-01-01

Abstract

A common feature of financial time series is their strong persistence. Yet, long memory may 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 price with respect to volatility and show how cross-sectional aggregation may generate spurious persistence in the data. We undertake an extensive Monte Carlo study to compare the performances of five tests, constructed under the null of true long memory versus the alternative of spurious long memory due to level shifts or breaks.
journal article - articolo
2015
Leccadito, Arturo; Rachedi, Omar; Urga, Giovanni
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/31068
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