Pascalau, Razvan and Thomann, Christian and Gregoriou, Greg N. (2010): Unconditional mean, Volatility and the FourierGarch representation. Published in: Aestimatio No. 1 (December 2010): pp. 120.

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Abstract
This paper proposes a new model called FourierGARCH that is a modification of the popular GARCH(1,1). This modification allows for timevarying first and second moments via means of Flexible Fourier transforms. A nice feature of this model is its ability to capture both short and long run dynamics in the volatility of the data, requiring only that the proper frequencies of the Fourier transform be specified. Several simulations show the ability of the Fourier series to approximate breaks of an unknown form, irrespective of the time or location of breaks. The paper shows that the main cause of the long run memory effect seen in stock returns is the result of a time varying first moment. In addition, the study suggests that allowing only the second moment to vary over time is not sufficient to capture the high persistence observed in lagged returns.
Item Type:  MPRA Paper 

Original Title:  Unconditional mean, Volatility and the FourierGarch representation 
English Title:  Unconditional mean, Volatility and the FourierGarch representation 
Language:  English 
Keywords:  ARCH/GARCH, Structural change, Unconditional volatility 
Subjects:  G  Financial Economics > G1  General Financial Markets > G12  Asset Pricing ; Trading Volume ; Bond Interest Rates G  Financial Economics > G2  Financial Institutions and Services > G29  Other 
Item ID:  35932 
Depositing User:  IEB Research Department 
Date Deposited:  17 Jan 2012 07:33 
Last Modified:  29 Sep 2019 11:51 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/35932 