ARCH and GARCH Models vs. Martingale Volatility of Finance Market Returns
Statistical Finance
2008-12-02 v1 Data Analysis, Statistics and Probability
Physics and Society
Abstract
ARCH and GARCH models assume either i.i.d. or (what economists lable as) white noise as is usual in regression analysis while assuming memory in a conditional mean square fluctuation with stationary increments. We will show that ARCH/GARCH is inconsistent with uncorrelated increments, violating the i.i.d. and white assumptions and finance data and the efficient market hypothesis as well.
Keywords
Cite
@article{arxiv.0803.4480,
title = {ARCH and GARCH Models vs. Martingale Volatility of Finance Market Returns},
author = {Joseph L. McCauley},
journal= {arXiv preprint arXiv:0803.4480},
year = {2008}
}