4.4 Article

IGARCH models and structural breaks

Journal

APPLIED ECONOMICS LETTERS
Volume 10, Issue 12, Pages 765-768

Publisher

ROUTLEDGE TAYLOR & FRANCIS LTD
DOI: 10.1080/1350485032000138403

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Using Monte Carlo simulations, it is shown that fitting a mis-specified GARCH model to a true MS-GARCH process tends to produce IGARCH parameter estimates. In other words, the presence of structural breaks can result in spuriously high estimates of the degree of persistence of shocks to the conditional variance.

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