Temperature Volatility

Temperature level is of course heavily studied, and trending upward alarmingly quickly. In a new paper, Glenn Rudebusch and I study temperature volatility, which has been much less heavily studied. We show that temperature volatility is pervasively trending downward, and that its "twin peaks" seasonal pattern is also evolving, both of which have implications for agriculture and much else. Our analysis is based on the daily temperature range, in precise parallel with the time-honored use of the daily log price range as a volatility (quadratic variation) estimator in financial markets.