Structurally-Induced Volatility Clustering
Mark Machina () and
University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego
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 (search for similar items in EconPapers)
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