Modelling the structural break in volatility
Recent studies suggest that US and other developed economies have become considerably stabilized in terms of volatility since the mid-1980s (Stock and Watson, 2002). This study models the structural break in volatility using a dynamic factor model with two state variables: one capturing cyclical fluctuations and another reflecting volatility decline. The new model confirms a one-time volatility reduction in the US economy in February 1984. Four-regime models appear to outperform two-regime models.
Year of publication: |
2006
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Authors: | Kholodilin, Konstantin ; Yao, Vincent Wenxiong |
Published in: |
Applied Economics Letters. - Taylor & Francis Journals, ISSN 1350-4851. - Vol. 13.2006, 7, p. 417-422
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Publisher: |
Taylor & Francis Journals |
Saved in:
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