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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


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:
Publisher Keywords: Fractional integration, Regime switching, Structural break,
Subjects: H Social Sciences > HG Finance
Q Science > QA Mathematics
Departments: Bayes Business School > Finance
Date available in CRO: 04 Jun 2015 13:39
Date deposited: 25 July 2017
Date of first online publication: 21 April 2015
Text - Accepted Version
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