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?

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50 XP

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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.

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exercise