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The distribution of realized variances: Marginal behaviors, asymmetric dependence and contagion effects

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  • Ané, Thierry
  • Métais, Carole
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    Abstract

    We examine the unconditional distribution of the realized variance of three European stock market indexes obtained from intraday transaction prices. We find that they share common distributional features: a significant mass close to zero, a sharp decrease afterwards and a significant right tail. Their important differences, however, compel us to model them non-parametrically through lognormal kernel estimators. We then move to the analysis of their dependence structure and find strong evidence of asymmetry. Hence, unlike common practice, we resort to non-exchangeable copula models. Such a characterization also allows us to assess the direction of greater contamination among stock market variances.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Review of Financial Analysis.

    Volume (Year): 18 (2009)
    Issue (Month): 3 (June)
    Pages: 134-150

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    Handle: RePEc:eee:finana:v:18:y:2009:i:3:p:134-150

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    Web page: http://www.elsevier.com/locate/inca/620166

    Related research

    Keywords: Realized volatility Asymmetric dependence Positive kernel Contamination;

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