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A Mixed Frequency Stochastic Volatility Model for Intraday Stock Market Returns

A Mixed Frequency Stochastic Volatility Model for Intraday Stock Market Returns
Author: Jeremias Bekierman
Publisher:
Total Pages:
Release: 2019
Genre:
ISBN:

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We propose a mixed frequency stochastic volatility (MFSV) model for the dynamics of intraday asset return volatility. In order to account for long-memory we separate stochastic daily and intraday volatility patterns by introducing a long-run component that changes at daily frequency and a short-run component that captures the remaining intraday volatility dynamics. An additional component captures deterministic intraday patterns. We analyze the stochastic properties of the resulting non-linear state-space model both on the daily and the intraday frequency and show how the model can be estimated in a single step using simulated maximum likelihood based on Efficient Importance Sampling (EIS). We apply the model to intraday returns of five New York Stock Exchange traded stocks. The estimation results indicate distinct dynamic patterns for daily and intradaily volatility components, where about 50% of intraday volatility dynamics are explained by the daily component. In-sample diagnostic tests and an out-of-sample forecasting experiment indicate that already the very basic model specification successfully accounts for the complex dynamic and distributional properties of asset returns both on the intraday and the daily frequency.


Interday and Intraday Volatility

Interday and Intraday Volatility
Author: Gary Gang Tian
Publisher:
Total Pages: 33
Release: 2014
Genre:
ISBN:

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After examining both the interday and intraday return volatility of the Shanghai Composite Stock Index, it was found that the open-to-open return variance is consistently greater than the close-to-close variance. Examining the volatility of interday returns and variance ratio tests with five-minute intervals reveals an L-shaped pattern, or more precisely, two L-shaped patterns, starting with a small hump during both the morning and the afternoon sessions, with the morning session having a much higher interday volatility than the afternoon session. This L-shaped interday volatility is supported by the similarly shaped intraday volatility pattern. This result suggests that the high volatility of intraday returns for the market open is not entirely due to the trading mechanisms (call auction in the market opening) but also due to both the accumulated overnight information and the trading halt effect. The five-minute breaks after the auction and blind auction procedures are the two major driving forces which exaggerate the high intraday volatility observed at the market open.


Stock-return Volatility and Intraday Equity Trading by Investor Typesin Thailand

Stock-return Volatility and Intraday Equity Trading by Investor Typesin Thailand
Author: Anucha Ratanaparadorn
Publisher:
Total Pages: 126
Release: 2017
Genre:
ISBN:

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I examine the intraday stock-return volatility pattern and relationship between the volatility and intraday trading by individual, institutional, foreign and proprietary investors in the Stock Exchange of Thailand. The volatility pattern of SET100 during January 2010 through December 20161 follows the L-shape in the morning and muted U-shape the afternoon session which is consistent with findings from many stock markets around the world. For large-size stocks, the net purchase of informed (institutional and foreign) investors with the net sale of less-informed (individual) investor drive the positive volatility effect. This result is always significant; however, cannot be explained by information-based explanation but rather more aligned with liquidity-driven explanation. For small stocks, the net proprietary trading has an increasing impact on volatility, which is consistent with liquidity pressure explanation. This result is significant and robust to different size of the portfolio and different measure of the volatility after controlling for lagged volatilities, number of trades, average trade size, opening, closing and Monday effect.


Intraday Trading Patterns and Day-of-the-Week in Stock Index Options Markets

Intraday Trading Patterns and Day-of-the-Week in Stock Index Options Markets
Author: Min-Hsien Chiang
Publisher:
Total Pages:
Release: 2007
Genre:
ISBN:

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This article studies the intraday patterns of trading volume, volatility, and spreads and day-of-the-week variations for stock index options traded on the Taiwan Futures Exchange (TAIFEX). In addition, we examine the overnight variations in returns, volatility and spreads as well. We find that trading volume of TAIFEX options exhibit a U-shaped pattern. While the volatility at the market open is extremely volatile, the volatility quickly levels off for much of the rest of a trading. The bid-ask spreads pattern for TAIFEX options approximately follows a U-shaped pattern with a small hump immediately after 13:00 hours. The mean returns at Monday open for TAIFEX calls are lower while returns at the end of a trading day are larger. Calls have smaller overnight variations in volatility and bid-ask spreads compared to those in puts.


Testing for Market Microstructure Effects in Intraday Volatility

Testing for Market Microstructure Effects in Intraday Volatility
Author: Torben Gustav Andersen
Publisher:
Total Pages: 21
Release: 1998
Genre: Foreign exchange market
ISBN:

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This paper develops mew robust inference procedures for analyzing the intraday return volatility patterns that constitute a focal point of much market microstructure theory. Our empirical analysis is motivated by the recent lifting of trading restrictions in the interbank foreign exchange (FX) market for Japanese banks during the Tokyo lunch period. Ito, Lyons, and Melvin (1998) (ILM) argue that this deregulation resulted in a highly significant shift in the volatility pattern across the entire Japanese trading day, indicating that private information is an important component of the price formation process in the FX market. In contrast, our robust analysis finds no evidence for any discernible change in the pattern outside of the Tokyo lunch period. Moreover, we document that the standard variance-ratio methodology inference in this high-frequency data context.


Intraday Patterns in Foreign Exchange Returns and Realized Volatility

Intraday Patterns in Foreign Exchange Returns and Realized Volatility
Author: Hao Zhang
Publisher:
Total Pages: 0
Release: 2018
Genre:
ISBN:

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This paper investigates intraday patterns in foreign exchange returns based on a sample of 16 currencies versus the U.S. dollar using high-frequency data for the period 2010-2015. We find that home currencies tend to depreciate during domestic trading sessions and appreciate during U.S. trading sessions after London markets are closed, indicating that intraday patterns in foreign exchange returns exist in many countries, including countries with capital controls. Intraday patterns in foreign exchange returns are significantly related to realized volatility, which reflects risk attributable to order flow and market sensitivity to order flow in domestic and foreign markets.


Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market

Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market
Author: Mark Minervini
Publisher: McGraw Hill Professional
Total Pages: 353
Release: 2013-04-19
Genre: Business & Economics
ISBN: 0071807233

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