DEFINITION of 'TimeVarying Volatility'
Fluctuations in volatility over time. Volatility is the standard deviation of returns from a financial instrument, and hence a measure of its risk. Timevarying 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.
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BREAKING DOWN 'TimeVarying Volatility'
For example, volatility of the S&P 500 Index was unusually low during the 200307 bull market, but reached record levels during the creditcrunchinduced market crash of 2008.
Economist Robert F. Engle, along with Clive Granger, won the 2003 Nobel Memorial Prize in Economics for his groundbreaking analysis of economic time series with timevarying volatility.
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