Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/62853
Authors: 
Baillie, Richard T.
Morana, Claudio
Year of Publication: 
2007
Series/Report no.: 
Working Paper, Department of Economics, Queen Mary, University of London 593
Abstract: 
This paper introduces a new long memory volatility process, denoted by Adaptive FIGARCH, or A-FIGARCH, which is designed to account for both long memory and structural change in the conditional variance process. Structural change is modeled by allowing the intercept to follow a slowly varying function, specified by Gallant (1984)'s flexible functional form. A Monte Carlo study finds that the A-FIGARCH model outperforms the standard FIGARCH model when structural change is present, and performs at least as well in the absence of structural instability. An empirical application to stock market volatility is also included to illustrate the usefulness of the technique.
Subjects: 
FIGARCH, Long memory, Structural change, Stock market volatility
JEL: 
C15
C22
F31
Document Type: 
Working Paper

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