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Financial econometrics: Past developments and future challenges

Tim Bollerslev??*

?Department of Economics, Duke University, Durham, NC 27708, USA

?NBER, Cambridge, MA 02138, USA

Abstract

The "eld of "nancial econometrics has had a glamorous run during the life span of the Journal of Econometrics. This note provides a selective summary of the most important developments in the "eld over the past two decades, notably ARCH and GMM, along with a discussion of promising avenues for future research. ? 2001 Elsevier Science S.A. All rights reserved.

JEL classixcation: C1; G1

Keywords: ARCH; GMM; High-frequency data; Long memory; Continuous time

modeling; Risk-neutral distributions

sion can be used for prediction. Explain this. How is it that regression can be used to predict values not in the data set, but correlation cannot? 2. Identify the two criteria that a dependent variable must meet for ordinary least squares regression to be used. 247