Which of the following stylized facts does a GARCH model not directly capture?

Which of the following stylized facts does a GARCH model not directly capture?

Select one:

a. Heavy tails.

b. Volatility clustering.

c. Lack of persistence in the levels of returns.

d. Asymmetry in the returns distribution.

Answer

c. Lack of persistence in the levels of returns.

Explanation

It is clearly noted that one of the deficiencies of the GARCH model is that it does not allow differentiating the patterns of decline of the persistence in short and long-term volatility and this being one of the factors that make most statistics use different models rather than GARCH especially those that are aimed in getting the persistence in the levels of returns