Interaction models for common long-range dependence in asset price volatilitiesGilles Teyssiere No 2003026, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Abstract: We consider a class of microeconomic models with interacting agents which replicate the main properties of asset prices time series: nonlinearities i levels and common degree of long-memory in the volatilities and co-volatilities of multivariate time series. For these models, longrange dependence in asset price volatility is the consequence of swings in opinions and herding behavior of market participants, which generate switches in the heteroskedastic structure of asset prices. Thus, the observed long-memory in asset prices volatility might be the outcome of a change-point in the conditional variance process, a conclusion supported by a wavelet analysis of the volatility series. This explains why volatility processes share only the properties of the second moments of long-memory processes, but not the properties of the first moments. Keywords: long-memory; field effects; interaction models; changepoints; wavelets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2003026 Access Statistics for this paper More papers in LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC. |
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