The distribution of realized variances: Marginal behaviors, asymmetric dependence and contagion effects
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.
If 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.
References listed on IDEAS
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.:
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2003.
"Modeling and Forecasting Realized Volatility,"
Econometric Society, vol. 71(2), pages 579-625, March.
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2001. "Modeling and Forecasting Realized Volatility," Center for Financial Institutions Working Papers 01-01, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2001. "Modeling and Forecasting Realized Volatility," NBER Working Papers 8160, National Bureau of Economic Research, Inc.
- Anderson, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Labys, Paul, 2002. "Modeling and Forecasting Realized Volatility," Working Papers 02-12, Duke University, Department of Economics.
- Hansen, Bruce E, 1996.
"Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis,"
Econometric Society, vol. 64(2), pages 413-30, March.
- Tom Doan, . "TAR: RATS procedure to estimate a threshold autoregression, tests for threshold effect," Statistical Software Components RTS00209, Boston College Department of Economics.
- Hansen, B.E., 1991. "Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis," RCER Working Papers 296, University of Rochester - Center for Economic Research (RCER).
- Tom Doan, . "RATS programs to replicate Hansen's threshold estimation and testing results," Statistical Software Components RTZ00091, Boston College Department of Economics.
- Vaz de Melo Mendes, Beatriz & Martins de Souza, Rafael, 2004. "Measuring financial risks with copulas," International Review of Financial Analysis, Elsevier, vol. 13(1), pages 27-45.
- Theodossiou, Panayiotis, et al, 1997. "Volatility Reversion and Correlation Structure of Returns in Major International Stock Markets," The Financial Review, Eastern Finance Association, vol. 32(2), pages 205-24, May.
- Andrew Patton, 2004.
"Modelling Asymmetric Exchange Rate Dependence,"
wp04-04, Warwick Business School, Finance Group.
- GIOT, Pierre & LAURENT, Sébastien, .
"Modelling daily Value-at-Risk using realized volatility and ARCH type models,"
CORE Discussion Papers RP
1708, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Giot, Pierre & Laurent, Sebastien, 2004. "Modelling daily Value-at-Risk using realized volatility and ARCH type models," Journal of Empirical Finance, Elsevier, vol. 11(3), pages 379-398, June.
- Pierre Giot & Sébastien Laurent, 2002. "Modelling Daily Value-at-Risk Using Realized Volatility and ARCH Type Models," Computing in Economics and Finance 2002 52, Society for Computational Economics.
- Giot Pierre & Laurent Sebastien, 2001. "Modelling daily value-at-risk using realized volatility and arch type models," Research Memorandum 014, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
- Olivier SCAILLET, 2001.
"Density Estimation Using Inverse and Reciprocal Inverse Guassian Kernels,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales)
2001017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- O. Scaillet, 2001. "Density Estimation Using Inverse and Reciprocal Inverse Gaussian Kernels," THEMA Working Papers 2001-24, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- M. Illueca & J. A. LaFuente, 2006.
"New evidence on expiration‐day effects using realized volatility: An intraday analysis for the Spanish stock exchange,"
Journal of Futures Markets,
John Wiley & Sons, Ltd., vol. 26(9), pages 923-938, 09.
- Juan A. Lafuente & Manuel Illueca Muñoz, 2006. "New Evidence On Expiration-Day Effects Using Realized Volatility: An Intraday Analysis For The Spanish Stock Exchange," Working Papers. Serie EC 2006-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Joe, Harry, 2005. "Asymptotic efficiency of the two-stage estimation method for copula-based models," Journal of Multivariate Analysis, Elsevier, vol. 94(2), pages 401-419, June.
- Xiaodong Jin & Janusz Kawczak, 2003. "Birnbaum-Saunders and Lognormal Kernel Estimators for Modelling Durations in High Frequency Financial Data," Annals of Economics and Finance, Society for AEF, vol. 4(1), pages 103-124, May.
- Chan, Choon Chat & Fong, Wai Mun, 2006. "Realized volatility and transactions," Journal of Banking & Finance, Elsevier, vol. 30(7), pages 2063-2085, July.
- Chen, Song Xi, 1999. "Beta kernel estimators for density functions," Computational Statistics & Data Analysis, Elsevier, vol. 31(2), pages 131-145, August.
- François Longin, 2001. "Extreme Correlation of International Equity Markets," Journal of Finance, American Finance Association, vol. 56(2), pages 649-676, 04.
- Ng, Angela, 2000. "Volatility spillover effects from Japan and the US to the Pacific-Basin," Journal of International Money and Finance, Elsevier, vol. 19(2), pages 207-233, April.
- Thierry Ané & Hélyette Geman, 2000. "Order Flow, Transaction Clock, and Normality of Asset Returns," Journal of Finance, American Finance Association, vol. 55(5), pages 2259-2284, October.
- de Melo Mendes, Beatriz Vaz & Kolev, Nikolai, 2008. "How long memory in volatility affects true dependence structure," International Review of Financial Analysis, Elsevier, vol. 17(5), pages 1070-1086, December.
- Andersen T. G & Bollerslev T. & Diebold F. X & Labys P., 2001. "The Distribution of Realized Exchange Rate Volatility," Journal of the American Statistical Association, American Statistical Association, vol. 96, pages 42-55, March.
- Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Ebens, Heiko, 2001. "The distribution of realized stock return volatility," Journal of Financial Economics, Elsevier, vol. 61(1), pages 43-76, July.
- Andersen, Torben G. & Bollerslev, Tim, 1997. "Intraday periodicity and volatility persistence in financial markets," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 115-158, June.
- Andersen, Torben G & Bollerslev, Tim, 1998. "Answering the Skeptics: Yes, Standard Volatility Models Do Provide Accurate Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 885-905, November.
- Pong, Shiuyan & Shackleton, Mark B. & Taylor, Stephen J. & Xu, Xinzhong, 2004. "Forecasting currency volatility: A comparison of implied volatilities and AR(FI)MA models," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2541-2563, October.
- Andersen, Torben G. & Bollerslev, Tim & Cai, Jun, 2000. "Intraday and interday volatility in the Japanese stock market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(2), pages 107-130, June.
- 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.
- Martens, Martin, 2001. "Forecasting daily exchange rate volatility using intraday returns," Journal of International Money and Finance, Elsevier, vol. 20(1), pages 1-23, February.
- Thierry Ane & Cecile Kharoubi, 2003. "Dependence Structure and Risk Measure," The Journal of Business, University of Chicago Press, vol. 76(3), pages 411-438, July.
- Song Chen, 2000. "Probability Density Function Estimation Using Gamma Kernels," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 52(3), pages 471-480, September.
- Okimoto, Tatsuyoshi, 2008. "New Evidence of Asymmetric Dependence Structures in International Equity Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(03), pages 787-815, September.
- Liebscher, Eckhard, 2008. "Construction of asymmetric multivariate copulas," Journal of Multivariate Analysis, Elsevier, vol. 99(10), pages 2234-2250, November.
- Thomakos, Dimitrios D. & Wang, Tao, 2003. "Realized volatility in the futures markets," Journal of Empirical Finance, Elsevier, vol. 10(3), pages 321-353, May.
When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:18:y:2009:i:3:p:134-150. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.