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Temporal aggregation, volatility components and volume in high frequency UK bond futures

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  • David McMillan
  • Alan Speight

Abstract

This paper examines volatility in UK Long Gilt and Short Sterling futures over several intra-day frequencies. Initial GARCH model estimates are found to exhibit remaining residual structure and to be inconsistent with theoretical temporal aggregation results for all frequencies other than the full day. Further estimates suggest that intra-day volatility is more adequately characterized by a component model which decomposes volatility into short-run effects which dominate intra-day periods and long-run effects which dominate inter-day horizons, and that such components are associated with the arrival of information flows as proxied by volume. This component volatility model is also able to account for all dependence in Long Gilt futures at frequencies of 15 minutes and lower, and in Short Sterling futures at 1 hour and lower.

Suggested Citation

  • David McMillan & Alan Speight, 2002. "Temporal aggregation, volatility components and volume in high frequency UK bond futures," The European Journal of Finance, Taylor & Francis Journals, vol. 8(1), pages 70-92.
    • Handle: RePEc:taf:eurjfi:v:8:y:2002:i:1:p:70-92
    DOI: 10.1080/13518470110073676
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    2. John Cotter, 2005. "Uncovering long memory in high frequency UK futures," The European Journal of Finance, Taylor & Francis Journals, vol. 11(4), pages 325-337.
    3. Robert Daigler, 2007. "Spread volume for currency futures," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 31(1), pages 12-19, March.
    4. Zied Ftiti & Fredj Jawadi & Waël Louhichi, 2017. "Modelling the relationship between future energy intraday volatility and trading volume with wavelet," Applied Economics, Taylor & Francis Journals, vol. 49(20), pages 1981-1993, April.

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