The Effects of Structural Breaks in Arch and GARCH Parameters on Persistence of GARCH Models

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type 01 Jan 2004Publisher:Elsevier BVJournal:Communications in Statistics - Simulation and Computation, volume 37, pages 571-578 (issn: 0361-0918, eissn: 1532-4141,

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Authors: Soosung Hwang; Pedro L. Valls Pereira;

doi: 10.2139/ssrn.623162 , 10.1080/03610910701812378

The Effects of Structural Breaks in Arch and GARCH Parameters on Persistence of GARCH Models

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Abstract

We show that persistence of conditional volatility in large samples could be exaggerated by the existence of structural breaks in the ARCH and GARCH parameters. Our results suggest that extreme persistence frequently observed in index volatility does not necessarily indicate the same level of persistence over the sample period.

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