Academy of Economic Studies DOCTORAL SCHOOL OF FINANCE AND BANKING Bucharest 2003 Long Memory in Volatility on the Romanian Stock Market Msc Student: Gabriel Bobeica Supervisor: PhD. Professor Moisa Altar

Contents Long-term dependence ARFIMA and FIGARCH models Long-memory detection and estimation Conclusions and further research Long Memory in Volatility on the Romanian Stock Market ⌐ ⌐ ⌐ ⌐ Motivation ⌐

Asset pricing Asset allocation Risk management Building a robust market instrument Long Memory in Volatility on the Romanian Stock Market Volatility’s implications on ⌐

Long-term dependence Long Memory in Volatility on the Romanian Stock Market Self similar processes ⌐ Long-memory processes ⌐

ARFIMA and FIGARCH models Long Memory in Volatility on the Romanian Stock Market ARFIMA model. Granger and Joyeux (1980) and Hosking (1981) ⌐ FIGARCH model. Baillie, Bollerslev and Mikkelsen (1993) ⌐ Chung (2001)

Long-memory detection and estimation R/S statistic Spectral regression estimator Maximum likelihood estimator Long Memory in Volatility on the Romanian Stock Market ⌐ ⌐ ⌐ Unit roots method ⌐ ADF and KPSS

Volatility investigation Long Memory in Volatility on the Romanian Stock Market Ten individual stock series. ⌐ Returns ⌐ Trading selection criterion Different sample size Volatility ⌐ Squared returns Absolute returns Range

Volatility investigation Long Memory in Volatility on the Romanian Stock Market

Volatility investigation Long Memory in Volatility on the Romanian Stock Market

Volatility investigation Long Memory in Volatility on the Romanian Stock Market

Volatility investigation Long Memory in Volatility on the Romanian Stock Market

GARCH, FIGARCH and IGARCH estimation Long Memory in Volatility on the Romanian Stock Market

Conclusions Long Memory in Volatility on the Romanian Stock Market Incremental ranking, in terms of autocorrelation structure AIC and SIC indicates the FIGARCH models ⌐ ⌐ The presence of long-range dependence for the three volatility specifications ⌐ Returns Squared returns Absolute returns Range volatilities

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