why checking correlation in square series?

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Yoshiko Kawashima
Yoshiko Kawashima 2011년 12월 6일
Why MATLAB product help (Econometric tools-Getting started-Time series modelling-GARCH models) calculates the correlation in both return series and the square of the return series. What is the reason for investigating the correlation in square series?

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Wayne King
Wayne King 2011년 12월 6일
I'm guessing because correlation in the squared returns indicates correlation in the process variance. And that would indicate the possibility that the process is a good candidate for GARCH modeling.

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