Long memory and Periodicity in Intraday Volatility
AbstractIntraday return volatilities are characterized by the contemporaneous presence of periodicity and long memory. This paper proposes two new parameterizations of the intraday volatility: the Fractionally Integrated Periodic EGARCH and the Seasonal Fractional Integrated Periodic EGARCH, which provide the required flexibility to account for both features. The periodic kurtosis and periodic autocorrelations of power transformations of the absolute returns are computed for both models. The empirical application shows that volatility of the hourly Emini S&P 500 futures returns are characterized by a periodic leverage effect coupled with a statistically significant long-range dependence. An out-of-sample forecasting comparison with alternative models shows that a constrained version of the FI-PEGARCH provides superior forecasts. A simulation experiment is carried out to investigate the effects that sample frequency has on the fractional differencing parameter estimate.
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.
Bibliographic InfoPaper provided by University of Pavia, Department of Economics and Management in its series DEM Working Papers Series with number 015.
Length: 41 pages
Date of creation: Nov 2012
Date of revision:
Intraday volatility; Long memory; FI-PEGARCH; SFI-PEGARCH; Periodicmodels.;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-17 (All new papers)
- NEP-ECM-2012-11-17 (Econometrics)
- NEP-ETS-2012-11-17 (Econometric Time Series)
- NEP-FOR-2012-11-17 (Forecasting)
- NEP-MST-2012-11-17 (Market Microstructure)
- NEP-RMG-2012-11-17 (Risk Management)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Barbara Bedowska-Sojka, 2011. "The Impact of Macro News on Volatility of Stock Exchanges," Dynamic Econometric Models, Wydawnictwo Naukowe Uniwersytetu Mikolaja Kopernika, vol. 11, pages 99-110.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alice Albonico).
If references are entirely missing, you can add them using this form.