In this paper, we develop a statistical unobserved component model for stock market volatility. The volatility, which is measured by the conditional variance of stock returns, is decomposed into a permanent or long-run and a transitory or short-run component. The transitory component is mean-...

Volatility and Time Series Econometrics: Essays in Honor of Robert F. .Engle Edited by Tim Bollerslev, Jeffrey R. Russell, and Mark W. Watson OXFORD UNIVERSITY PRESS ...