IDEAS home Printed from https://ideas.repec.org/a/taf/eurjfi/v14y2008i6p523-540.html
   My bibliography  Save this article

Forecasting daily volatility with intraday data

Author

Listed:
  • Bart Frijns
  • Dimitris Margaritis

Abstract

The aim of this paper is to assess to what extent intraday data can explain and predict end-of-the-day volatility. Using a realized volatility measure as proposed by Andersen, T., T. Bollerslev, F. Diebold, and P. Labys. 2001. The distribution of realized exchange rate volatility. Journal of the American Statistical Association 96: 42-55, we hypothesize that volatility generated at the start of the day is an important predictor of daily volatility either on its own accord or in conjunction with information about the seasonal pattern characterizing intraday volatility. We address the question of how much information needs to arrive to the market before a good predictor can be formed. Using data from a specialist market (NYSE), a dealer market (Nasdaq) and a continuous auction market (Paris Bourse), we investigate how different trading structures may affect intraday volatility formation. As a preview to our results, we find that the explanatory power of first-hour volatility for daily volatility is as high as 68%, whereas the average volatility generated during this first hour is <30%. Comparison to a standard GARCH model shows that the forecasts based on the intraday data are generally highly informative both on their own accord and in combination with the GARCH forecasts.

Suggested Citation

  • Bart Frijns & Dimitris Margaritis, 2008. "Forecasting daily volatility with intraday data," The European Journal of Finance, Taylor & Francis Journals, vol. 14(6), pages 523-540.
  • Handle: RePEc:taf:eurjfi:v:14:y:2008:i:6:p:523-540
    DOI: 10.1080/13518470802187644
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/13518470802187644
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Torben G. Andersen & Tim Bollerslev & Nour Meddahi, 2004. "Analytical Evaluation Of Volatility Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1079-1110, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jan Hanousek & Evžen Kočenda, 2011. "Foreign News and Spillovers in Emerging European Stock Markets," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 170-188, February.
    2. Daniel Jubinski & Amy F. Lipton, 2012. "Equity volatility, bond yields, and yield spreads," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 32(5), pages 480-503, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:eurjfi:v:14:y:2008:i:6:p:523-540. 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: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/REJF20 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.