Spurious persistence in stochastic volatility

We show that structural changes in stochastic volatility models induce spurious persistence. Other than in GARCH-type models, implied persistence does not tend to unity with given size of the structural change and increasing sample size. •We show that structural changes in stochastic volatility (SV)...

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Published inEconomics letters Vol. 121; no. 2; pp. 221 - 223
Main Authors Messow, Philip, Krämer, Walter
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.11.2013
Elsevier Science Ltd
Subjects
Economic models
Persistence
Stochastic models
Stochastic volatility
Structural adjustment
Structural change
Studies
Volatility
Persistence
Stochastic volatility
C32
Structural change
C58
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Abstract We show that structural changes in stochastic volatility models induce spurious persistence. Other than in GARCH-type models, implied persistence does not tend to unity with given size of the structural change and increasing sample size. •We show that structural changes in stochastic volatility (SV) models induce spurious persistence.•From empirical applications it is observable that SV-models are more persistent for larger samples.•For SV-models persistence does not tend to unity if sample size increases in contrast to GARCH-models.
AbstractList We show that structural changes in stochastic volatility models induce spurious persistence. Other than in GARCH-type models, implied persistence does not tend to unity with given size of the structural change and increasing sample size. [PUBLICATION ABSTRACT]
We show that structural changes in stochastic volatility models induce spurious persistence. Other than in GARCH-type models, implied persistence does not tend to unity with given size of the structural change and increasing sample size. •We show that structural changes in stochastic volatility (SV) models induce spurious persistence.•From empirical applications it is observable that SV-models are more persistent for larger samples.•For SV-models persistence does not tend to unity if sample size increases in contrast to GARCH-models.
Author Messow, Philip
Krämer, Walter
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  givenname: Walter
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Cites_doi 10.1007/BF02925214
10.1016/j.econlet.2007.02.012
10.1016/j.jspi.2009.09.008
10.1016/j.econlet.2011.09.012
10.1080/07350015.1990.10509794
10.1080/07474938608800096
10.1162/003465304323023886
10.1080/07474939908800354
10.2307/2297980
10.1016/j.jeconom.2004.09.005
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Stochastic volatility
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Structural change
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Snippet We show that structural changes in stochastic volatility models induce spurious persistence. Other than in GARCH-type models, implied persistence does not tend...
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SubjectTerms Economic models
Persistence
Stochastic models
Stochastic volatility
Structural adjustment
Structural change
Studies
Volatility
Title Spurious persistence in stochastic volatility
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