Doubly fractional models for dynamic heteroskedastic cycles

Strong persistence is a common phenomenon that has been documented not only in the levels but also in the volatility of many time series. The class of doubly fractional models is extended to include the possibility of long memory in cyclical (non-zero) frequencies in both the levels and the volatility and a new model, the GARMA-GARMASV (Gegenbauer AutoRegressive Mean Average - Id. Stochastic Volatility) is introduced. A sequential estimation strategy, based on the Whittle approximation to maximum likelihood is proposed and its finite sample performance is evaluated with a Monte Carlo analysis. Finally, a trifactorial in the mean and bifactorial in the volatility version of the model is proved to successfully fit the well-known sunspot index.Research supported by the Spanish Ministerio de Ciencia y Tecnología and ERDF grants SEJ2007-61362/ECON and ECO2010-15332/ECON. The first author also acknowledges support from the Departamento de Educación, Universidades e Investigación of the Basque Country Government

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Doubly fractional models for dynamic heteroskedastic cycles

Strong persistence is a common phenomenon that has been documented not only in the levels but also in the volatility of many time series. The class of doubly fractional models is extended to include the possibility of long memory in cyclical (non-zero) frequencies in both the levels and the volatility and a new model, the GARMA-GARMASV (Gegenbauer AutoRegressive Mean Average - Id. Stochastic Volatility) is introduced. A sequential estimation strategy, based on the Whittle approximation to maximum likelihood is proposed and its finite sample performance is evaluated with a Monte Carlo analysis. Finally, a trifactorial in the mean and bifactorial in the volatility version of the model is proved to successfully fit the well-known sunspot index.Research supported by the Spanish Ministerio de Ciencia y Tecnología and ERDF grants SEJ2007-61362/ECON and ECO2010-15332/ECON. The first author also acknowledges support from the Departamento de Educación, Universidades e Investigación of the Basque Country Government