Volatility Clustering in Monthly Stock Returns

Posted: 25 Sep 2007

See all articles by Ben Jacobsen

Ben Jacobsen

Tilburg University - TIAS School for Business and Society; Massey University

Dennis Dannenburg

affiliation not provided to SSRN

Abstract

We investigate volatility clustering using a modeling approach based on the temporal aggregation results for generalized autoregressive conditional heteroscedasticity (GARCH) models in Drost and Nijman [Econometrica, 1993]. Our findings highlight that volatility clustering, contrary to widespread belief, is not only present in high-frequency financial data. Monthly data also exhibit significant serial dependence in the second moments. We show that the use of temporal aggregation to estimate low-frequency models reduces parameter uncertainty substantially.

Keywords: Stock returns, GARCH, Volatility clustering, Temporal aggregation

JEL Classification: C20, G10

Suggested Citation

Jacobsen, Ben and Dannenburg, Dennis, Volatility Clustering in Monthly Stock Returns. Journal of Empirical Finance, Vol. 10, No. 4, 2003. Available at SSRN: https://ssrn.com/abstract=1016668

Ben Jacobsen (Contact Author)

Tilburg University - TIAS School for Business and Society ( email )

Warandelaan 2
TIAS Building
Tilburg, Noord Brabant 5037 AB
Netherlands

Massey University ( email )

Auckland
New Zealand

Dennis Dannenburg

affiliation not provided to SSRN ( email )

No Address Available

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