Long-memory in volatilities of CDS spreads: Evidences from the emerging markets
Date
2016
Authors
Gunay, Samet
Shi, Yanlin
Journal Title
Journal ISSN
Volume Title
Publisher
Institute for Economic Forecasting
Abstract
In this study, we analyze the long-memory dependency in volatility of CDS spreads of four emerging markets (Turkey, Russia, South Africa, and Brazil) from 2001 to 2014. Preliminary evidence from Detrended Fluctuations Analysis (DFA) suggests the existence of long memory in all markets. We then use the fractionally integrated generalized autoregressive conditional heteroskedasticity (FIGARCH) model to estimate the magnitudes of the long-memory parameter. Following the information of modified ICSS test, the Adaptive FIGARCH (A-FIGARCH) and the Time-Varying FIGARCH (TV-FIGARCH) are also employed to control for the potential effects of structural breaks. The results are generally robust with those obtained from the FIGARCH model. The significant long-memory suggests that the Efficient Market Hypothesis (EMH) may not hold for the CDS spreads of those four countries.
Description
Keywords
long-memory, emerging markets, CDS, spreads, efficient market hypothesis
Citation
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Source
Romanian Journal of Economic Forecasting
Type
Journal article
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Access Statement
Open Access via publisher website
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DOI
Restricted until
2099-12-31