Near-integrated GARCH sequences

DOI10.1214/105051604000000783zbMATH Open1059.62092arXivmath/0503520OpenAlexW3101852111MaRDI QIDQ1774201FDOQ1774201

Authors: István Berkes, Lajos Horváth, Piotr Kokoszka 

Publication date: 29 April 2005

Published in: The Annals of Applied Probability (Search for Journal in Brave)

Abstract: Motivated by regularities observed in time series of returns on speculative assets, we develop an asymptotic theory of GARCH(1,1) processes {y_k} defined by the equations y_k=sigma_kepsilon_k, sigma_k^2=omega +alpha y_{k-1}^2+�eta sigma_{k-1}^2 for which the sum alpha +�eta approaches unity as the number of available observations tends to infinity. We call such sequences near-integrated. We show that the asymptotic behavior of near-integrated GARCH(1,1) processes critically depends on the sign of gamma :=alpha +�eta -1. We find assumptions under which the solutions exhibit increasing oscillations and show that these oscillations grow approximately like a power function if gamma leq 0 and exponentially if gamma >0. We establish an additive representation for the near-integrated GARCH(1,1) processes which is more convenient to use than the traditional multiplicative Volterra series expansion.

Full work available at URL: https://arxiv.org/abs/math/0503520

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Mathematics Subject Classification ID

Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Asymptotic distribution theory in statistics (62E20) Applications of statistics to actuarial sciences and financial mathematics (62P05) Economic time series analysis (91B84)

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Cited In (8)

• Tests for volatility shifts in GARCH against long-range dependence
• ARCH/GARCH with persistent covariate: asymptotic theory of MLE
• Sequential monitoring for changes from stationarity to mild non-stationarity
• Testing for randomness in a random coefficient autoregression model
• NEAR-INTEGRATED RANDOM COEFFICIENT AUTOREGRESSIVE TIME SERIES
• Limit theory for moderate deviation from integrated GARCH processes
• On estimation in conditional heteroskedastic time series models under non-normal distribu\-tions
• GARCH (1,1) processes are near epoch dependent

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