City Research Online

True Versus Spurious Long Memory: Some Theoretical Results and a Monte Carlo Comparison

Leccadito, A., Rachedi, O. and Urga, G. (2015). True Versus Spurious Long Memory: Some Theoretical Results and a Monte Carlo Comparison. Econometric Reviews, 34(4), pp. 452-479. doi: 10.1080/07474938.2013.808462

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 performance of five tests, constructed under the null of true long memory versus the alternative of spurious long memory due to level shifts or breaks.

Publication Type: Article
Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis in Econometric Reviews on 7 Nov 2014, available online: http://wwww.tandfonline.com/10.1080/07474938.2013.808462
Publisher Keywords: Fractional integration, Regime switching, Structural break,
Subjects: H Social Sciences > HG Finance
Q Science > QA Mathematics
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/6975
[img]
Preview
Text - Accepted Version
Download (365kB) | Preview

Export

Downloads

Downloads per month over past year

View more statistics

Actions (login required)

Admin Login Admin Login