Volatility Clustering in High-Frequency Data: A self-fulfilling prophecy?

Matei Demetrescu

Economics Bulletin, 2007, vol. 7, issue 15, 1-8

Abstract: Clustering volatility is shown to appear in a simple market model with noise trading simply because agents use volatility forecasting models. At the core of the argument lies a feed-back mechanism linking past observed volatility to present observed volatility. Its stability properties are critical as to what kind of volatility will ultimately be observed.

JEL-codes: G1 (search for similar items in EconPapers)
Date: 2007-10-17
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