Experience Stern | News & Events

Excerpt from Bloomberg -- "Forecasting asset returns in the financial markets is notoriously difficult, but, oddly enough, volatility is more predictable: both ARCH and GARCH models show that shocks to volatility are persistent and exhibit long half-lives. Such shocks can be extracted from volatility estimators and, with this in mind, Professor Engle has developed a new Geopolitical Volatility Factor (GPVF). The GPVF is based on the standardized residuals from a factor model with GARCH-style residuals. He then tested the model by applying estimation algorithms to nine U.S. sector ETFs and 45 MSCI country ETFs and studying the results through Monte Carlo simulations."

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