MODELAREA VOLATILITATII CU

MODELE ARCH-GARCH
 VARIANCE
Until the early 80s econometrics had focused almost
solely on modeling the means of series, i.e. their actual
values. Recently however we have focused increasingly
on the importance of volatility, its determinates and its
effects on mean values.
A key distinction is between the conditional and
unconditional variance.
The unconditional variance is just the standard
measure of the variance
Var(X) =E(XE(X))2
 VARIANCE
The conditional variance is the measure of our
uncertainty about a variable given a model and an
information set. Cond Var(x) =E(x-E(x| ))2
This is the true measure of uncertainty Conditional
variance

variance

mean
 VARIANCE
Stylized Facts of asset returns
i. Thick tails: they tend to be leptokurtic
ii. Volatility clustering: Mandelbrot, large changes tend to be
followed by large changes of either sign
iii. Leverage Effects: refers to the tendency for changes in stock prices
to be negatively correlated with changes in volatility.
iv. Non-trading period effects: when a market is closed, information
seems to accumulate at a different rate to when it is open. e.g.
stock price volatility on Monday is not three times the volatility on
Tuesday.
v. Forecastable events: volatility is high at regular times such as news
announcements or other expected events, or even at certain times
of day, e.g. less volatile in the early afternoon.
vi. Volatility and serial correlation: There is a suggestion of an inverse
relationship between the two.
vii. Co-movements in volatility: There is considerable evidence that
volatility is positively correlated across assets in a market and even
across markets
Serii de timp cu volatilitate stochastic
Caracteristici ale Seriilor Financiare
Caracteristici ale Seriilor Financiare
 -0.1
0.1

-0.15
-0.05
0.05
0.15

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Volatility Clustering

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12/15/2010
Modele ARCH
Modele GARCH
GARCH(1,1)