The theoretical and empirical econometric literatures on long memory and regime switching have evolved largely independently, as the phenomena appear distinct. We argue, in contrast, that they are intimately related, and we substantiate our claim in several environments, including a simple...

The huge theoretical and empirical econometric literatures on long memory and on structural change have evolved largely independently, as the phenomena appear distinct. We argue, in contrast, that they are intimately related. In particular, we show analytically that stochastic regime switching...

The theoretical and empirical econometric literatures on long memory and regime switching have evolved largely independently, as the phenomena appear distinct. We argue, in contrast, that they are intimately related, and we substantiate our claim in several environments, including a simple...

We show that the common practice of converting 1-day volatility estimates to h-day estimates by scaling by the sqaure root of h is inappropriate and produces overestimates of the variability of long-horizon volatility. We conclude that volatility models are best tailored to tasks: if interest...