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

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Book cover Processes with Long-Range Correlations

Part of the book series: Lecture Notes in Physics ((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.

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Author information

Authors and Affiliations

  1. GREQAM & CORE, Centre de la Vieille Charité, F-13002, Marseille, France

    Gilles Teyssière

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  1. Gilles Teyssière
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Editors and Affiliations

  1. Dept. of Mathematics, Indian Institute of Science, 560 012, Bangalore, India

    Govindan Rangarajan

  2. Center for Complex Systems and Brain Sciences, Florida Atlantic University, 33431, Boca Raton, FL, USA

    Mingzhou Ding

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Teyssière, G. (2003). Interaction Models for Common Long-Range Dependence in Asset Prices Volatility. In: Rangarajan, G., Ding, M. (eds) Processes with Long-Range Correlations. Lecture Notes in Physics, vol 621. Springer, Berlin, Heidelberg. https://doi.org/10.1007/3-540-44832-2_14

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  • DOI: https://doi.org/10.1007/3-540-44832-2_14

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  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-540-40129-2

  • Online ISBN: 978-3-540-44832-7

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