Exercise

Effect of window length choice

To the right are two plots of rolling annualized volatility. One of the plots has rolling windows of 6 months, and the other has windows of 24 months. Which one is more timely in terms of reacting to recent shocks?

Instructions

50 XP

Possible answers

Annualized volatility on rolling window of 24 months.

Annualized volatility on rolling window of 6 months.

Neither plots provide enough information to see recent shocks in the market

Both plots provide sufficient information to see recent shocks in the market.