The Spline-GARCH Model for Low Frequency Volatility and Its Global Macroeconomic Causes

  title={The Spline-GARCH Model for Low Frequency Volatility and Its Global Macroeconomic Causes},
  author={Robert F. Engle},
Twenty-five years of volatility research has left the macroeconomic environment playing a minor role. This paper proposes modeling equity volatilities as a combination of macroeconomic effects and time series dynamics. High frequency return volatility is specified to be the product of a slow-moving component, represented by an exponential spline, and a unit GARCH. This slowmoving component is the low frequency volatility, which in this model coincides with the unconditional volatility. This… CONTINUE READING
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