The Spline GARCH Model for Unconditional Volatility and its Global Macroeconomic Causes

41 Pages Posted: 7 Nov 2008

See all articles by Robert F. Engle

Robert F. Engle

New York University - Leonard N. Stern School of Business - Department of Economics; New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)

J. Gonzalo Rangel

affiliation not provided to SSRN

Date Written: August 2005

Abstract

We introduce a new model to measure unconditional volatility, the Spline-GARCH. The model is applied to equity markets for 50 countries for up to 50 years of daily data. Macroeconomic determinants of unconditional volatility are investigated. It is found that volatility in macroeconomic factors such as gdp growth, inflation and short term interest rates are important explanatory variables that increase volatility. There is evidence that high inflation and low growth of output are positive determinants. Volatility is higher for emerging markets and for markets with small numbers of listings but also for large economies.

Suggested Citation

Engle, Robert F. and Rangel, J. Gonzalo, The Spline GARCH Model for Unconditional Volatility and its Global Macroeconomic Causes (August 2005). NYU Working Paper No. SC-CFE-04-05. Available at SSRN: https://ssrn.com/abstract=1297088

Robert F. Engle (Contact Author)

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

New York University (NYU) - Department of Finance

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

J. Gonzalo Rangel

affiliation not provided to SSRN

No Address Available

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