Testing for time-varying long-range dependence in volatility for emerging markets

Abstract

This paper tests whether volatility for equity returns for emerging markets possesses longrange dependence. Furthermore, the assertion of whether long-range dependence is timevarying is checkedthrough a rolling sample approach. The empirical results suggest that there exists long-range dependence in emerging equity returns’ volatility and also that it is timevarying. This assertion also holds true for Japan and the US, which are considered more developed markets. Moreover, these results are robust to ‘‘shuffling’’ the data to eliminate short-term autocorrelation. Therefore, they suggest that the class of GARCH processes, which are currently employedto analyze volatility of financial time series, is misspecified.