TESTING FOR LONG MEMORY IN VOLATILITY

We consider the asymptotic behavior of log-periodogram regression estimators of the memory parameter in long-memory stochastic volatility models, under the null hypothesis of short memory in volatility. We show that in this situation, if the periodogram is computed from the log squared returns, then the estimator is asymptotically normal, with the same asymptotic mean and variance that would hold if the series were Gaussian. In particular, for the widely used GPH estimator dGPH under the null hypothesis, the asymptotic mean of mýdGPH is zero and the asymptotic variance is piò/24 where m is the number of Fourier frequencies used in the regression. This justifies an ordinary Wald test for long memory in volatility based on the log periodogram of the log squared returns.Statistics Working Papers Serie