GARCH Model

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Bollerslev (1986) introduced the GARCH model that allows the conditional variance to be a function of the prior period’s squared errors and of its past conditional variances. The GARCH models can identify the tendency for volatility clustering in financial data. Volatility clustering in stock return indicates that large price changes are followed by large price changes and small price changes are followed by small price changes.

Sayed Farrukh Ahmed
Assistant Professor
Faculty of Business & Economics
Daffodil International University