Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67753
Authors: 
Christensen, Bent Jesper
Nielsen, Morten Ørregaard
Zhu, Jie
Year of Publication: 
2009
Series/Report no.: 
Queen's Economics Department Working Paper 1207
Abstract: 
We extend the fractionally integrated exponential GARCH (FIEGARCH) model for daily stock return data with long memory in return volatility of Bollerslev and Mikkelsen (1996) by introducing a possible volatility-in-mean effect. To avoid that the long memory property of volatility carries over to returns, we consider a filtered FIEGARCH-in-mean (FIEGARCH-M) effect in the return equation. The filtering of the volatility-in-mean component thus allows the co-existence of long memory in volatility and short memory in returns. We present an application to the daily CRSP value-weighted cum-dividend stock index return series from 1926 through 2006 which documents the empirical relevance of our model. The volatility-in-mean effect is significant, and the FIEGARCH-M model outperforms the original FIEGARCH model and alternative GARCH-type specifications according to standard criteria.
Subjects: 
FIEGARCH
financial leverage
GARCH
long memory
risk-return tradeoff
stock returns
volatility feedback
JEL: 
C22
Document Type: 
Working Paper

Files in This Item:
File
Size
215.09 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.