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

This paper tests whether volatility for equity returns for emerging markets possesses long-range dependence. Furthermore, the assertion of whether long-range dependence is time-varying is checked through a rolling sample approach. The empirical results suggest that there exists long-range dependence in emerging equity returns' volatility and also that it is time-varying. 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 employed to analyze volatility of financial time series, is misspecified.