Volatility dynamics and heterogeneous markets
Recent research has suggested that intra-day volatility may possess a component structure, resulting either from the arrival of heterogeneous information or the actions of heterogeneous market agents. This paper reports direct evidence for the existence of such components in S&P500 index and DM|$ exchange rate data. Estimation of a FIGARCH model supports the contention that volatility dynamics result from multiple sources. Using a HARCH conditional variance model which defines volatility components over differing time horizons, confirmatory evidence of heterogeneous components is reported, in which context the impact of high-frequency speculation and noise-trading are particularly apparent. Copyright © 2006 John Wiley & Sons, Ltd.
Volume (Year): 11 (2006)
Issue (Month): 2 ()
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