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Stationarity and Persistence in the GARCH(1,1) Model

Published online by Cambridge University Press:  11 February 2009

Daniel B. Nelson
Daniel B. Nelson
Affiliation:
University of Chicago
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Abstract

This paper establishes necessary and sufficient conditions for the stationarity and ergodicity of the GARCH(l.l) process. As a special case, it is shown that the IGARCH(1,1) process with no drift converges almost surely to zero, while IGARCH(1,1) with a positive drift is strictly stationary and ergodic. We examine the persistence of shocks to conditional variance in the GARCH(l.l) model, and show that whether these shocks "persist" or not depends crucially on the definition of persistence. We also develop necessary and sufficient conditions for the finiteness of absolute moments of any (including fractional) order.

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Type
Articles
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Econometric Theory , Volume 6 , Issue 3 , September 1990 , pp. 318 - 334
Copyright
Copyright © Cambridge University Press 1990

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