Long-run financial market volatility has strong effects on real economy, researchers say
Bank of England paper breaks volatility into long-run and short-run components
Financial market volatility can be broken down into a persistent long-run and a temporary short-run component, which have very different impacts on the economy, a working paper published by the Bank of England finds.
In Financial market volatility, macroeconomic fundamentals and investor sentiment, Ching-Wai Chiu, Richard Harris, Evarist Stoja and Michael Chin investigate the relationship between these three factors.
The authors present a two-factor model to decompose the volatility of returns
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