In this paper, we empirically examine the volatility process of Korean stock market returns using the KOSPI200. To investigate the property of the process, we use the FIGARCH (Fractionally Integrated GARCH) model that includes GARCH and 1GARCH processes as special cases. Since the FIGARCH model allows fractional integration order, it can detect hyperbolically decaying volatility processes with cannot be explained by existing models with integer integration order. The result shows that the KOSPI200 exhibits long-term dependencies. To investigate the robustness of the obtained result, we analyze the time and cross-sectional aggregation effect using weekly data and individual stock returns that the KOSPI200 is comprised of. The long memory property of the KOSPI200 does not seem to be spuriously induced by aggregation.
Research Article|
November 30 2002
Long memory in the volatility of Korean stock returns
Publisher: Emerald Publishing on behalf of Korea Derivatives Association
Online ISSN: 2713-6647
Print ISSN: 1229-988X
© 2002 Emerald Publishing Limited
2002
This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
Journal of Derivatives and Quantitative Studies: Seonmul yeon’gu (2002) 10 (2): 95–114.
Citation
Lee JH, Kim DS, Lee HG (2002), "Long memory in the volatility of Korean stock returns". Journal of Derivatives and Quantitative Studies: Seonmul yeon’gu, Vol. 10 No. 2 pp. 95–114, doi: https://doi.org/10.1108/JDQS-02-2002-B0004
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