Spatial and Spatiotemporal Volatility Models: A Review

Philipp Otto, Osman Do\u{g}an, S\"uleyman Ta\c{s}p{\i}nar, Wolfgang Schmid and Anil K. Bera

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Abstract: Spatial and spatiotemporal volatility models are a class of models designed to capture spatial dependence in the volatility of spatial and spatiotemporal data. Spatial dependence in the volatility may arise due to spatial spillovers among locations; that is, if two locations are in close proximity, they can exhibit similar volatilities. In this paper, we aim to provide a comprehensive review of the recent literature on spatial and spatiotemporal volatility models. We first briefly review time series volatility models and their multivariate extensions to motivate their spatial and spatiotemporal counterparts. We then review various spatial and spatiotemporal volatility specifications proposed in the literature along with their underlying motivations and estimation strategies. Through this analysis, we effectively compare all models and provide practical recommendations for their appropriate usage. We highlight possible extensions and conclude by outlining directions for future research.

Date: 2023-08
New Economics Papers: this item is included in nep-ecm, nep-geo, nep-rmg and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2308.13061

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