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Assesing the Economic Significance of the Intra-daily Volatility Seasonalities

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  • Zdravetz Lazarov

    (School of Economics and Finance, Queensland University of Technology)

Abstract

It is a well established empirical fact that volatility follows approxi- mately an inverted U-shaped pattern during the day. It is high in the morning, gradually decreasing, reaching a minimum at lunch time and then starting to increase again until the end of the trading day. In this paper we investigate the dynamic properties of these intra-daily volatility seasonalities. More specifically, we divide daily volatility into several parts and model them separately. Our analysis shows that morning/afternoon volatility has a different time-series behaviour in comparison to lunch time volatility. Also, a substantial improvement in forecasting performance can be obtained by partitioning daily volatility into parts which correspond to the observed intra-daily seasonalities.

Suggested Citation

  • Zdravetz Lazarov, 2005. "Assesing the Economic Significance of the Intra-daily Volatility Seasonalities," School of Economics and Finance Discussion Papers and Working Papers Series 203, School of Economics and Finance, Queensland University of Technology.
  • Handle: RePEc:qut:dpaper:203
    as

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    File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2005/No%20203%20-%20Lavarov%20-%20Sept.pdf
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    References listed on IDEAS

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