Structural Change and Spurious Persistence in Stochastic Volatility

Arbeitspapier

We extend the well established link between structural change and estimated persistence from GARCH to stochastic volatility (SV) models. Whenever structural changes in some model parameters increase the empirical autocorrelations of the squares of the underlying time series, the persistence in volatility implied by the estimated model parameters follows suit. This explains why stochastic volatility often appears to be more persistent when estimated from a larger sample as then the likelihood increases that there might have been some structural change in between.

Object Details

• ISBN: 978-3-86788-357-3
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Ruhr Economic Papers ; No. 310

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Financial Econometrics
• Subject: Persistence ; stochastic volatility ; structural change

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Krämer, Walter ; Messow, Philip
• Event: Veröffentlichung
• (who): Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)
• (where): Essen
• (when): 2012

Further information

• DOI: doi:10.4419/86788357
• Handle: http://hdl.handle.net/10419/61435
• Last update: 10.03.2025, 11:43 AM CET