Ch 8 - Modelling asset volatility : an introduction Flashcards
1
Q
What is homoskedasticity?
A
Variance of the error term is constant over time
2
Q
The squared residual can reveal information about _______
A
Volatility
3
Q
How do we model the regression if the assumption of homoscedasticity does not hold?
A
ARCH and GARCH models
4
Q
What are the 2 ways of testing for volatility clustering?
A
Ljung Box test
ARCH test
