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Extracting the global stochastic trend from non-synchronous data on the volatility of financial indices

Author

Listed:
  • Pogorelova, Polina

    (National Research University Higher School of Economics (NRU HSE), Moscow, Russian Federation;)

  • Peresetsky, Anatoly

    (National Research University Higher School of Economics (NRU HSE), Moscow, Russian Federation;)

Abstract

In this paper, the Kalman linear filter method is used to decompose non-synchronous observations of the realized volatility of financial indices (NIKKEI 225, FTSE 100, S&P 500) into unobservable global and local components. It is shown that the volatility of the New York S&P 500 index is a global component, while the Tokyo NIKKEI 225 index, on the contrary, is more sensible to the local news. It is shown that the largest contribution to the global component comes from the observation interval from the closing of the London Exchange to the closing of the exchange in New York (16:30 and 21:00 UTC, respectively). Starting from about 2012–2014, the contribution to the volatility of the global news market is growing from the interval from closing the exchange in New York to closing the exchange in Tokyo (from 21:00 to 6:00 UTC). This can be attributed to the recently increasing influence of the economies of Asian countries (China, Japan, Korea) on the world economy.

Suggested Citation

  • Pogorelova, Polina & Peresetsky, Anatoly, 2020. "Extracting the global stochastic trend from non-synchronous data on the volatility of financial indices," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 57, pages 53-71.
  • Handle: RePEc:ris:apltrx:0387
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    global stochastic trend; Kalman filter; realized volatility; non-synchronous data; financial markets.;
    All these keywords.

    JEL classification:

    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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