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Uncovering long memory in high frequency UK futures

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  • John Cotter

Abstract

Accurate volatility modelling is paramount for optimal risk management practices. One stylized feature of financial volatility that impacts the modelling process is long memory explored in this paper for alternative risk measures, observed absolute and squared returns for high frequency intraday UK futures. Volatility series for three different asset types, using stock index, interest rate and bond futures are analysed. Long memory is strongest for the bond contract. Long memory is always strongest for the absolute returns series and at a power transformation of k < 1. The long memory findings generally incorporate intraday periodicity. The APARCH model incorporating seven related GARCH processes generally models the futures series adequately documenting ARCH, GARCH and leverage effects.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

Volume (Year): 11 (2005)
Issue (Month): 4 ()
Pages: 325-337

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Handle: RePEc:taf:eurjfi:v:11:y:2005:i:4:p:325-337

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Keywords: Long memory; APARCH; high frequency futures;

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References

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Cited by:
  1. John Cotter & Simon Stevenson, 2011. "Modeling Long Memory in REITs," Papers 1103.5414, arXiv.org.
  2. Luis A. Gil-Alana & Yun Cao, 2010. "Stock market prices in China. Efficiency, mean reversion, long memory volatility and other implicit dynamics," Faculty Working Papers 12/11, School of Economics and Business Administration, University of Navarra.
  3. Gil-Alana, Luis A. & Shittu, Olanrewaju I. & Yaya, OlaOluwa S., 2014. "On the persistence and volatility in European, American and Asian stocks bull and bear markets," Journal of International Money and Finance, Elsevier, vol. 40(C), pages 149-162.
  4. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2013. "Long Memory and Fractional Integration in High Frequency Data on the US Dollar / British Pound Spot Exchange Rate," Discussion Papers of DIW Berlin 1294, DIW Berlin, German Institute for Economic Research.
  5. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2011. "Long Memory and Fractional Integration in High-Frequency British Pound / Dollar Spot Exchange Rates," Faculty Working Papers 02/11, School of Economics and Business Administration, University of Navarra.
  6. J. Cuñado & L. Gil-Alana & F. Gracia, 2009. "US stock market volatility persistence: evidence before and after the burst of the IT bubble," Review of Quantitative Finance and Accounting, Springer, vol. 33(3), pages 233-252, October.
  7. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2011. "Long Memory and Volatility Dynamics in the US Dollar Exchange Rate," Faculty Working Papers 04/11, School of Economics and Business Administration, University of Navarra.

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