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Realized Measures to Explain Volatility Changes over Time

Author

Listed:
  • Christos Floros

    (Department of Accounting and Finance, Hellenic Mediterranean University, 71410 Heraklion, Greece)

  • Konstantinos Gkillas

    (Department of Business Administration, University of Patras, University Campus–Rio, 26504 Patras, Greece)

  • Christoforos Konstantatos

    (Department of Business Administration, University of Patras, University Campus–Rio, 26504 Patras, Greece)

  • Athanasios Tsagkanos

    (Department of Business Administration, University of Patras, University Campus–Rio, 26504 Patras, Greece)

Abstract

We studied (i) the volatility feedback effect, defined as the relationship between contemporaneous returns and the market-based volatility, and (ii) the leverage effect, defined as the relationship between lagged returns and the current market-based volatility. For our analysis, we used daily measures of volatility estimated from high frequency data to explain volatility changes over time for both the S&P500 and FTSE100 indices. The period of analysis spanned from January 2000 to June 2017 incorporating various market phases, such as booms and crashes. Based on the estimated regressions, we found evidence that the returns of S&P500 and FTSE100 indices were well explained by a specific group of realized measure estimators, and the returns negatively affected realized volatility. These results are highly recommended to financial analysts dealing with high frequency data and volatility modelling.

Suggested Citation

  • Christos Floros & Konstantinos Gkillas & Christoforos Konstantatos & Athanasios Tsagkanos, 2020. "Realized Measures to Explain Volatility Changes over Time," JRFM, MDPI, vol. 13(6), pages 1-19, June.
    • Handle: RePEc:gam:jjrfmx:v:13:y:2020:i:6:p:125-:d:371152
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    7. Fiszeder, Piotr & Fałdziński, Marcin & Molnár, Peter, 2023. "Modeling and forecasting dynamic conditional correlations with opening, high, low, and closing prices," Journal of Empirical Finance, Elsevier, vol. 70(C), pages 308-321.

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