Working Paper: NBER ID: w10423
Authors: Francis X. Diebold
Abstract: I review and interpret two of Robert Engle's most important contributions: the theory and application of cointegration, and the theory and application of dynamic volatility models. I treat the latter much more extensively, de-emphasizing technical aspects and focusing instead on the intuition, nuances and importance of the work.
Keywords: No keywords provided
JEL Codes: A0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Engle's work on cointegration (C22) | presence of common stochastic trends (C22) |
| presence of common stochastic trends (C22) | long-run relationships among economic variables (E19) |
| long-run relationships among economic variables (E19) | stationarity of the cointegrating combination (C22) |
| Engle's introduction of the ARCH model (C22) | modeling of conditional heteroskedasticity (C22) |
| modeling of conditional heteroskedasticity (C22) | volatility of returns is time-varying (C58) |
| volatility of returns is time-varying (C58) | influenced by past squared returns (C22) |
| historical data analysis (N00) | empirical validation of Engle's work (C22) |
| Engle's theoretical advancements (I24) | practical applications in finance (G19) |