Nonlinear feedback and long-range memory in GARCH model
Recently journal Physica A accepted our, A. Kononovicius and J. Ruseckas, manuscript titled "Nonlinear GARCH model and 1/f noise" [1]. In this article we shown that simple memory-less model with nonlinear term may exhibit interesting stylized fact - long-range memory. Our manuscript is even more interesting due to the fact that considered model (and its various modifications) is somewhat widely used by the practitioners.
In previous blog posts we have demonstrated that one can reproduce power law distributions using GARCH(1,1) model and also that nonlinear GARCH(1,1) model enables reproduction of long-range memory. In this blog post we once again touch the topic of long-range memory, but now we consider nonlinear feedback.