Aggregation and memory of models of changing volatility
Zaffaroni, Paolo (2001) Aggregation and memory of models of changing volatility. Working Paper. Coventry: Warwick Business School, Financial Econometrics Research Centre. Working papers (Warwick Business School. Financial Econometrics Research Centre) (No.02-).
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Official URL: http://www2.warwick.ac.uk/fac/soc/wbs/research/wfr...
In this paper we study the effect of contemporaneous aggregation of an arbitrarily large number of processes featuring dynamic conditional heteroskedasticity with short memory when heterogeneity across units is allowed for. We look at the memory properties of the limit aggregate. General, necessary, conditions for long memory are derived. More specific results relative to certain stochastic volatility models are also developed, providing some examples of how long memory volatility can be obtained by aggregation.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||Faculty of Social Sciences > Warwick Business School > Financial Econometrics Research Centre
Faculty of Social Sciences > Warwick Business School
|Library of Congress Subject Headings (LCSH):||Stochastic analysis, Aggregation operators, Heteroscedasticity|
|Series Name:||Working papers (Warwick Business School. Financial Econometrics Research Centre)|
|Publisher:||Warwick Business School, Financial Econometrics Research Centre|
|Place of Publication:||Coventry|
|Official Date:||August 2001|
|Number of Pages:||37|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
Andersen, T. (1994): “Stochastic autoregressive volatility: a framework for volatility modelling,” Mathematical Finance, 4/2, 75–102.
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