Department of Economics and Business Economics

Modelling Time-Varying Volatility in Financial Returns: Evidence from the Bond Markets

Research output: Contribution to book/anthology/report/proceedingBook chapterResearchpeer-review

The “unusually uncertain” phase in the global financial markets has inspired many researchers to study the effects of ambiguity (or “Knightian uncertainty”) on the decisions made by investors and their implications for the capital markets. We contribute to this literature by using a modified version of the time-varying GARCH model of Amado and Teräsvirta (2013) to analyze whether the increasing uncertainty has caused excess volatility in the US and European government bond markets. In our model, volatility is multiplicatively decomposed into two time-varying conditional components: the first being captured by a stable GARCH(1,1) process and the second driven by the level of uncertainty in the financial market.
Original languageEnglish
Title of host publicationEssays in Nonlinear Time Series Econometrics
EditorsNiels Haldrup, Mika Meitz, Pentti Saikkonen
Number of pages20
Place of publicationOxford
PublisherOxford University Press
Publication year2014
ISBN (print)9780199679959
Publication statusPublished - 2014

    Research areas

  • Time-varying volatility, GARCH, VIX, Financial volatility modeling

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