A new estimator of the fractionally integrated stochastic volatility model

Many recent papers have considered models of fractional integration in the second moments of time series. But none proposes an estimator of the fractionally integrated stochastic volatility model with a known asymptotic distribution. In this paper I propose a GMM estimator of the fractionally integrated stochastic volatility model and prove that it is T-1/2 consistent and asymptotically normal if the order of fractional integration is less than 0.25. I provide calculations of asymptotic standard errors and Monte Carlo evidence on its finite sample performance. (C) 1999 Elsevier Science S.A. All rights reserved.