Time-Varying Volatility
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. |
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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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