« Riding the Nobel Chariot | Main | Rob the Sort of Optimist »

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83422977053ef00e393367d8c8834

Listed below are links to weblogs that reference Volatility Made Easy:

Comments

Adithya Yaga

Dear Prof. Engle:
In your JEP paper on GARCH and ARCH (Garch 101; Journal of Economic Perspectives-Volume 15, Number 4-Fall 2001-Pages 157-168) you say the following:

"Data in which the variances of the error terms are not equal, in which the error terms may reasonably be expected to be larger for some points or ranges of the data than for others, are said to suffer from heteroskedasticity. The standard warning is that in the presence of heteroskedasticity, the regression coefficients for an ordinary least squares regression are still unbiased, but the standard errors and confidence intervals estimated by conventional procedures will be too narrow, giving a false sense of precision."

This seems to imply that the standard errors will *always* be too low resulting in high t-stats and low p-values. It is not obvious to me why this should always be the case. If you could provide me with some intuition or direct me to where I may find it, I would be greatful.

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Comments are moderated, and will not appear until the author has approved them.