Persistence in variance, structural change, and the GARCH model

Christopher G Lamoureux, William D. Lastrapes

Research output: Contribution to journalArticle

543 Scopus citations

Abstract

This article examines the persistence of the variance, as measured by the generalized autoregressive conditional heteroskedasticity (GARCH) model, in stock-return data. In particular, we investigate the extent to which persistence in variance may be overstated because of the existence of, and failure to take account of, deterministic structural shifts in the model. Both an analysis of daily stock-return data and a Monte Carlo simulation experiment confirm the hypothesis that GARCH measures of persistence in variance are sensitive to this type of model misspecification.

Original languageEnglish (US)
Pages (from-to)225-234
Number of pages10
JournalJournal of Business and Economic Statistics
Volume8
Issue number2
DOIs
Publication statusPublished - 1990
Externally publishedYes

    Fingerprint

Keywords

  • Bootstrap
  • Integration in variance
  • L-GARCH
  • Monte Carlo

ASJC Scopus subject areas

  • Statistics and Probability
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty
  • Social Sciences (miscellaneous)

Cite this