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The Spline GARCH Model for Unconditional Volatility and its Global Macroeconomic Causes

Authors: Engle, Robert F.
Rangel, J. Gonzalo
Issue Date: 12-Aug-2005
Series/Report no.: SC-CFE-04-05
Abstract: We introduce a new model to measure unconditional volatility, the Spline-GARCH. The model is applied to equity markets for 50 countries for up to 50 years of daily data. Macroeconomic determinants of unconditional volatility are investigated. It is found that volatility in macroeconomic factors such as gdp growth, inflation and short term interest rates are important explanatory variables that increase volatility. There is evidence that high inflation and low growth of output are positive determinants. Volatility is higher for emerging markets and for markets with small numbers of listings but also for large economies.
Appears in Collections:Financial Econometrics

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