The goal of this paper is to illuminate the capability of the component GARCH model of Ding and Granger (1996) and Engle and Lee (1999) to reproduce the long memory-type behavior of financial volatility. The potential of this model to capture the long memory dynamics observed in measures of...

The empirical evidence from financial markets suggests that the pattern of response of market volatility to shocks is highly dependent on the magnitude of shocks themselves. Markov-Switching GARCH (MS-GARCH) models are a valuable tool for modelling state dependence in the dynamics of the...