Abstract
This paper establishes necessary and sufficient conditions for the stationarity and ergodicity of the GARCH(l.l) process. As a special case, it is shown that the IGARCH(1,1) process with no drift converges almost surely to zero, while IGARCH(1,1) with a positive drift is strictly stationary and ergodic. We examine the persistence of shocks to conditional variance in the GARCH(l.l) model, and show that whether these shocks "persist" or not depends crucially on the definition of persistence. We also develop necessary and sufficient conditions for the finiteness of absolute moments of any (including fractional) order.
Keywords
MathematicsAutoregressive conditional heteroskedasticityErgodic theoryErgodicityPersistence (discontinuity)Conditional varianceZero (linguistics)Applied mathematicsEconometricsVariance (accounting)Order (exchange)Mathematical analysisStatisticsEconomicsVolatility (finance)
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Publication Info
- Year
- 1990
- Type
- article
- Volume
- 6
- Issue
- 3
- Pages
- 318-334
- Citations
- 1110
- Access
- Closed
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Cite This
Daniel B. Nelson
(1990).
Stationarity and Persistence in the GARCH(1,1) Model.
Econometric Theory
, 6
(3)
, 318-334.
https://doi.org/10.1017/s0266466600005296
Identifiers
- DOI
- 10.1017/s0266466600005296