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Time-Varying Volatility

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Definition of 'Time-Varying Volatility'

Fluctuations in volatility over time. Volatility is the standard deviation of returns from a financial instrument, and hence a measure of its risk. Time-varying volatility implies that volatility is itself subject to large swings, with stocks and other financial instruments exhibiting periods of high volatility and low volatility at various points in time.

Investopedia Says

Investopedia explains 'Time-Varying Volatility'

For example, volatility of the S&P 500 Index was unusually low during the 2003-07 bull market, but reached record levels during the credit-crunch-induced market crash of 2008. Economist Robert F. Engle, along with Clive Granger, won the 2003 Nobel Memorial Prize in Economics for his ground-breaking analysis of economic time series with time-varying volatility.

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