Bubbles and long-range dependence in asset prices volatilities
(2002)
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- Authors
- Abstract
- A model for a financial asset is constructed with two types of agents. The agents differ in terms of their beliefs. The proportions of the two types change over time according to a stochastic process which models the interaction between the agents. Thus, unlike other models, agents do not persist in holding "wrong" beliefs. Bubble-like phenomena in the asset price occur. We consider several tests for detecting long range dependence and change-points in the conditional variance process. Although the model seems to generate long-memory properties of the volatility series, we show that this is due to the switching of regimes which are detected by the tests we propose.
- Affiliations
Citations
Kirman, A., & Teyssiere, G. (2002). Bubbles and long-range dependence in asset prices volatilities (CORE Discussion Papers 2002/60). https://hdl.handle.net/2078.5/74449