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Interaction Models for Common Long-Range Dependence in Asset Prices Volatility

  • Gilles Teyssière
Chapter
Part of the Lecture Notes in Physics book series (LNP, volume 621)

Abstract

We consider a class ofmicro economic models with interacting agents which replicate the main properties ofasset prices time series: non-linearities in levels and common degree oflong-memory in the volatilities and co-volatilities ofm ultivariate time series. For these models, long-range dependence in asset price volatility is the consequence ofswings in opinions and herding behavior ofmark et participants, which generate switches in the heteroskedastic structure ofasset prices. Thus, the observed long-memory in asset prices volatility might be the outcome ofa change-point in the conditional variance process, a conclusion supported by a wavelet anaysis ofthe volatility series. This explains why volatility processes share only the properties ofthe second moments oflong-memory processes, but not the properties ofthe first moments.

Keywords

Asset Price Financial Time Series Volatility Process Absolute Return Wavelet Estimator 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2003

Authors and Affiliations

  • Gilles Teyssière
    • 1
  1. 1.GREQAM & CORECentre de la Vieille CharitéMarseilleFrance

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