1. 1 CHAPTER 13 FORECASTING VOLATILITY I Figure 13.1 The Forecasting Problem González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 13.1.2 Volatility Within the Context of Our Forecasting Problem

2. 2 Figure 13.2 U.S. Real GDP with Volatility Bands González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 13.2 Time-Varying Dispersion: Empirical Evidence

3. 3 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. Figure 13.3 Volatility of Consumer Price Index Inflation

4. 4 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. Figure 13.4 Global Inflation Rate

5. González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 5 Figure 13.5 Monthly Returns of the SP500 Index

6. 6 Table 13.1 Summary of the Dispersion in the Monthly Returns to the SP500 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc.

7. 7 13.3 Is There Time Dependence in Volatility? Figure 13.6 Time Series of SP500 Index, Yen/Dollar Exchange Rate, and 10-year Treasure Note Yield Table 13.2 Unit Root Testing: Value of the Dickey-Fuller Test

8. González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 8 Figure 13.7 Transformations of Weekly Returns to the SP500 Index and Their Autocorrelations

9. González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 9 Figure 13.7 Transformations of Weekly Returns to the SP500 Index and Their Autocorrelations (continued)

10. González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 10 Figure 13.8 Transformations of Daily Returns to Yen/Dollar Exchange Rate and Their Autocorrelations

11. González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 11 Figure 13.8 Transformations of Daily Returns to Yen/Dollar Exchange Rate and Their Autocorrelations (continued)

12. González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 12 Figure 13.9 Transformations of Daily Returns to the 10-Year Treasury Notes and Their Autocorrelations

13. González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 13 Figure 13.9 Transformations of Daily Returns to the 10-Year Treasury Notes and Their Autocorrelations (continued)

14. González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 14 Figure 13.10 Unconditional Histograms of SP500,Exchange Rate, and 10- Year Treasury Returns

15. González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 15 Figure 13.10 Unconditional Histograms of SP500,Exchang e Rate,10-Year Treasury Returns (continued)

16. González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 16 Figure 13.11 Rolling Window Volatility Forecast 13.5.1 Rolling Window Volatility

17. González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 17 Figure 13.12 EWMA Volatility Forecast 13.5.2 Exponentially Weighted Moving Average (EWMA) Volatility