Do common volatility models capture cyclical behaviour in volatility?

Adam Clements and Jérôme Collet

Applied Financial Economics, 2008, vol. 18, issue 7, pages 599-604

Abstract: This article examines whether commonly used models of volatility can capture the cyclical behaviour of equity market volatility. The ability of a number of models to account for the dynamics governing periods of increasing and decreasing volatility will be examined. In summary, the commonly used models considered here do not adequately capture the average duration of cycles or the duration dependence in equity volatility.

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