Detection of spurious and real breaks in realized volatility: An empirical study of the DIJA (2007)
Type of ContentConference Contributions - Published
PublisherUniversity of Canterbury. Economics.
University of Canterbury. Mathematics and Statistics.
Granger and Hyung (2004), Diebold and Inoue (2001) and Smith (2005) demonstrate how long memory and structural change can be confused because their finite sample properties are similar. In this paper we present a new approach to detecting multiple breaks in a series. The approach, which utilises the computational efficient methods based upon Atheoretical Regression Trees (ART), also allows categorisation of breaks as either 'spurious' or 'real'. We present empirical examples of the use of the approach utilising data on realised volatility from 16 Dow Jones Industrial Average index stock. Particular attention is placed on 5 stocks which exhibit long memory based upon the Beran (1992) test. Some statistical properties of the regimes identified are also considered.
CitationRea, B., Mendes, E., Oxley, L., Reale, M. (2007) Detection of spurious and real breaks in realized volatility: An empirical study of the DIJA. Brisbane, Australia: Workshop on Non-Linear and Complex Systems Analysis, 27-28 Sep 2007.
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Keywordslong-range dependence; strong dependence; global dependence; Hurst phenomena
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Rea, W.; Oxley, L.; Reale, M.; Mendes, E. (Department of Economics and FinanceUniversity of Canterbury. Economics.University of Canterbury. Mathematics and Statistics., 2008)It is now recognised that long memory and structural change can be confused because the statistical properties of times series of lengths typical of financial and econometric series are similar for both models. We propose ...