Modelling the Impact of Overnight Surprises on Intra-Daily Volatility
AbstractIn this paper we evaluate the impact that stock returns recorded between market closing and opening the next business day have on intra-daily volatility. A simple test shows that the estimated volatility clustering of the intra-daily returns may be affected by a market opening surprise bias. An extension of the standard GARCH model is suggested here to include the effect of this surprise and is applied on a sample of largely traded US stocks. The performance of two specifications in which this effect is included is evaluated in an out-of-sample forecasting exercise relative to their standard counterparts. Copyright 2001 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Australian Economic Papers.
Volume (Year): 40 (2001)
Issue (Month): 4 (December)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0004-900X
Other versions of this item:
- Giampiero M. Gallo, 2001. "Modelling the Impact of Overnight Surprises on Intra-daily Volatility," Econometrics Working Papers Archive wp2001_02, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-55, January.
- Gerety, Mason S & Mulherin, J Harold, 1994. "Price Formation on Stock Exchanges: The Evolution of Trading within the Day," Review of Financial Studies, Society for Financial Studies, vol. 7(3), pages 609-29.
- Amihud, Yakov & Mendelson, Haim, 1987. " Trading Mechanisms and Stock Returns: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 42(3), pages 533-53, July.
- Engle, Robert F & Ng, Victor K, 1993.
" Measuring and Testing the Impact of News on Volatility,"
Journal of Finance,
American Finance Association, vol. 48(5), pages 1749-78, December.
- Robert F. Engle & Victor K. Ng, 1991. "Measuring and Testing the Impact of News on Volatility," NBER Working Papers 3681, National Bureau of Economic Research, Inc.
- Romer, David, 1993.
"Rational Asset-Price Movements without News,"
American Economic Review,
American Economic Association, vol. 83(5), pages 1112-30, December.
- Stoll, Hans R & Whaley, Robert E, 1990. "Stock Market Structure and Volatility," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 37-71.
- Gallo Giampiero M. & Pacini Barbara, 1998.
"Early News is Good News: The Effects of Market Opening on Market Volatility,"
Studies in Nonlinear Dynamics & Econometrics,
De Gruyter, vol. 2(4), pages 1-19, January.
- Gallo, G.M. & Pacini, B., 1998. "Early News Is Good News. The Effects of Market Opening on Market Volatility," Economics Working Papers eco98/3, European University Institute.
- Pierre Blanc & R\'emy Chicheportiche & Jean-Philippe Bouchaud, 2013. "The fine structure of volatility feedback II: overnight and intra-day effects," Papers 1309.5806, arXiv.org.
- Christian T. Brownlees & Giampiero M. Gallo, 2010.
"Comparison of Volatility Measures: a Risk Management Perspective,"
Journal of Financial Econometrics,
Society for Financial Econometrics, vol. 8(1), pages 29-56, Winter.
- Christian T. Brownlees & Giampiero Gallo, 2008. "Comparison of Volatility Measures: a Risk Management Perspective," Econometrics Working Papers Archive wp2008_03, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
- Christian T. Brownlees & Giampiero Gallo, 2007. "Volatility Forecasting Using Explanatory Variables and Focused Selection Criteria," Econometrics Working Papers Archive wp2007_04, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
- Hiroki Masuda & Takayuki Morimoto, 2009. "An Optimal Weight for Realized Variance Based on Intermittent High-Frequency Data," Global COE Hi-Stat Discussion Paper Series gd08-033, Institute of Economic Research, Hitotsubashi University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.