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Volatility Clustering in High-Frequency Data: A self-fulfilling prophecy?

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  • Matei Demetrescu

    ()
    (Goethe University Frankfurt)

Abstract

Clustering volatility is shown to appear in a simple market model with noise trading simply because agents use volatility forecasting models. At the core of the argument lies a feed-back mechanism linking past observed volatility to present observed volatility. Its stability properties are critical as to what kind of volatility will ultimately be observed.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 7 (2007)
Issue (Month): 15 ()
Pages: 1-8

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Handle: RePEc:ebl:ecbull:eb-07g10014

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