Limit theory for the sample autocorrelations and extremes of a GARCH \((1,1)\) process. (English) Zbl 1105.62374

Summary: The asymptotic theory for the sample autocorrelations and extremes of a GARCH (1, 1) process is provided. Special attention is given to the case when the sum of the ARCH and GARCH parameters is close to 1, that is, when one is close to an infinite variance marginal distribution. This situation has been observed for various financial log-return series and led to the introduction of the IGARCH model. In such a situation, the sample autocorrelations are unreliable estimators of their deterministic counterparts for the time series and its absolute values, and the sample autocorrelations of the squared time series have nondegenerate limit distributions. We discuss the consequences for a foreign exchange rate series.


62M10 Time series, auto-correlation, regression, etc. in statistics (GARCH)
62P05 Applications of statistics to actuarial sciences and financial mathematics
62E20 Asymptotic distribution theory in statistics
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