School of Economics and Finance

No. 881: Long Memory, Realized Volatility and HAR Models

Richard T. Baillie , Michigan State University, USA, Kings College, University of London, UK & Rimini Center for Economic Analysis, Italy
Fabio Calonaci , Queen Mary University of London
Dooyeon Cho , Sungkyunkwan University, Republic of Korea
Seunghwa Rho , Emory University, USA

January 8, 2019

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The presence of long memory in Realized Volatility (RV) is a widespread stylized fact. The origins of long memory in RV have been attributed to jumps, structural breaks, non-linearities, or pure long memory. An important development has been the Heterogeneous Autoregressive (HAR) model and its extensions. This paper assesses the separate roles of fractionally integrated long memory models, extended HAR models and time varying parameter HAR models. We find that the presence of the long memory parameter is often important in addition to the HAR models.

J.E.L classification codes: C22, C31

Keywords:Long memory, Restricted ARFIMA, Realized volatility, HAR model, Time varying parameters