Structurally-Induced Volatility Clustering
UCSD, Economics Working Paper No. 2002-15
12 Pages Posted: 30 Jan 2003
Date Written: September 2002
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: Suggested Citation