Strict stationarity, persistence and volatility forecasting in ARCH(∞) processes (joint with Xiaoyu Li)

Wednesday 29 April 2015, 4.00PM to 5.00pm

Speaker(s): James Davidson (Exeter)


This paper derives a simple sufficient condition for strict stationarity in the ARCH(∞) class of processes with conditional heteroscedasticity. The concept of persistence in these processes is explored, and is the subject of a set of simulations showing how persistence depends on both the pattern of lag coefficients of the ARCH model and the distribution of the driving shocks. The results are used to argue that an alternative to the usual method of ARCH/GARCH volatility forecasting should be considered.

Location: Economics Department Staff Room, A/EC202

Admission: All welcome