Which of the following are NOT features of an IGARCH(1,1) model?
(I) Forecasts of the conditional variance will converge upon the unconditional variance as the horizon tends to infinity
(ii) The sum of the coefficients on the lagged squared error and the lagged conditional variance will be unity
(iii) Forecasts of the conditional variance will decline gradually towards zero as the horizon tends to infinity
(iv) Such models are never observed in reality
A) (ii) only
B) (ii) and (iv) only
C) (ii), (iii) and (iv) only
D) (i), (ii), (iii) and (iv)

Question

Quizplus · Accepted Answer

(ii) is incorrect because the sum of the coefficients on the lagged squared error and the lagged conditional variance will be less than unity.

Which of the Following Are NOT Features of an IGARCH(1,1)