Consider the ARCH model, (sigma_{t}^{2}=1.0+0.8 u_{t-1}^{2}). Explain why this will lead to volatility clustering. What happens when

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Consider the ARCH model, \(\sigma_{t}^{2}=1.0+0.8 u_{t-1}^{2}\). Explain why this will lead to volatility clustering. What happens when \(u_{t-1}^{2}\) is unusually large?

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Introduction To Econometrics

ISBN: 9780134461991

4th Edition

Authors: James Stock, Mark Watson

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Question Posted: May 02, 2024 03:52 AM

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Consider the ARCH model, (sigma_{t}^{2}=1.0+0.8 u_{t-1}^{2}). Explain why this will lead to volatility clustering. What happens when

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Introduction To Econometrics

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