Structurally-Induced Volatility Clustering

UCSD, Economics Working Paper No. 2002-15

12 Pages Posted: 30 Jan 2003

See all articles by Clive W. J. Granger

Clive W. J. Granger

University of California, San Diego (UCSD) - Department of Economics; Tinbergen Institute

Mark J. Machina

University of California at San Diego

Date Written: September 2002

Abstract

Many standard structural models in economics have the property that they induce persistent, partially predictable heteroskedasticity ("volatility clustering") in their key dependent variables, even when their underlying stochastic shock variables are all serially independent and homoskedastic, and their structural parameters are all time-invariant. This paper presents examples of this phenomenon, and examines the nature of such induced volatility clustering.

Keywords: Volatility Clustering, Induced Volatility Clustering, Stochastic Volatility, ARCH

JEL Classification: C53, G00, G12

Suggested Citation

Granger, Clive W. J. and Machina, Mark J., Structurally-Induced Volatility Clustering (September 2002). UCSD, Economics Working Paper No. 2002-15. Available at SSRN: https://ssrn.com/abstract=340701 or http://dx.doi.org/10.2139/ssrn.340701

Clive W. J. Granger

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States
858-534-3383 (Phone)
858-534-7040 (Fax)

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Mark J. Machina (Contact Author)

University of California at San Diego ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States
858-534-2391 (Phone)
858-534-7040 (Fax)

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