Heterogeneous information arrivals and return volatility dynamics: uncovering the long-run in high frequency returns
Recent empirical evidence suggests that the long-run dependence in financial market volatility is best characterized by a slowly mean-reverting fractionally integrated process. At the same time, much shorter-lived volatility dependencies are typically observed with high-frequency intradaily returns....
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| Hauptverfasser: | , |
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| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
Cambridge, Mass.
1996
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| Schriftenreihe: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
5752 |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Zusammenfassung: | Recent empirical evidence suggests that the long-run dependence in financial market volatility is best characterized by a slowly mean-reverting fractionally integrated process. At the same time, much shorter-lived volatility dependencies are typically observed with high-frequency intradaily returns. This paper draws on the information arrival, or mixture-of-distributions hypothesis interpretation of the latent volatility process in rationalizing this behavior. By interpreting the overall volatility as the manifestation of numerous heterogeneous information arrivals, sudden bursts of volatility typically will have both short-run and long-run components. Over intradaily frequencies, the short-run decay stands out most clearly, while the impact of the highly persistent processes will be dominant over longer horizons. These ideas are confirmed by our empirical analysis of a one-year time series of intradaily five-minute Deutschemark - U.S. Dollar returns. Whereas traditional time series based measures for the temporal dependencies in the absolute returns give rise to very conflicting results across different intradaily sampling frequencies, the corresponding semiparametric estimates for the order of fractional integration remain remarkably stable. Similarly, the autocorrelogram for the low-pass filtered absolute returns, obtained by annihilating periods in excess of one day, exhibit a striking hyperbolic rate of decay. |
| Beschreibung: | 32, [10] S. graph. Darst. |
Internformat
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| 490 | 1 | |a National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |v 5752 | |
| 520 | |a Recent empirical evidence suggests that the long-run dependence in financial market volatility is best characterized by a slowly mean-reverting fractionally integrated process. At the same time, much shorter-lived volatility dependencies are typically observed with high-frequency intradaily returns. This paper draws on the information arrival, or mixture-of-distributions hypothesis interpretation of the latent volatility process in rationalizing this behavior. By interpreting the overall volatility as the manifestation of numerous heterogeneous information arrivals, sudden bursts of volatility typically will have both short-run and long-run components. Over intradaily frequencies, the short-run decay stands out most clearly, while the impact of the highly persistent processes will be dominant over longer horizons. These ideas are confirmed by our empirical analysis of a one-year time series of intradaily five-minute Deutschemark - U.S. Dollar returns. Whereas traditional time series based measures for the temporal dependencies in the absolute returns give rise to very conflicting results across different intradaily sampling frequencies, the corresponding semiparametric estimates for the order of fractional integration remain remarkably stable. Similarly, the autocorrelogram for the low-pass filtered absolute returns, obtained by annihilating periods in excess of one day, exhibit a striking hyperbolic rate of decay. | ||
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| id | DE-604.BV011213427 |
| illustrated | Illustrated |
| indexdate | 2024-07-09T18:05:54Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-007522298 |
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| physical | 32, [10] S. graph. Darst. |
| publishDate | 1996 |
| publishDateSearch | 1996 |
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| series | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| series2 | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| spelling | Andersen, Torben Verfasser (DE-588)128603259 aut Heterogeneous information arrivals and return volatility dynamics uncovering the long-run in high frequency returns Torben G. Andersen ; Tim Bollerslev Cambridge, Mass. 1996 32, [10] S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 5752 Recent empirical evidence suggests that the long-run dependence in financial market volatility is best characterized by a slowly mean-reverting fractionally integrated process. At the same time, much shorter-lived volatility dependencies are typically observed with high-frequency intradaily returns. This paper draws on the information arrival, or mixture-of-distributions hypothesis interpretation of the latent volatility process in rationalizing this behavior. By interpreting the overall volatility as the manifestation of numerous heterogeneous information arrivals, sudden bursts of volatility typically will have both short-run and long-run components. Over intradaily frequencies, the short-run decay stands out most clearly, while the impact of the highly persistent processes will be dominant over longer horizons. These ideas are confirmed by our empirical analysis of a one-year time series of intradaily five-minute Deutschemark - U.S. Dollar returns. Whereas traditional time series based measures for the temporal dependencies in the absolute returns give rise to very conflicting results across different intradaily sampling frequencies, the corresponding semiparametric estimates for the order of fractional integration remain remarkably stable. Similarly, the autocorrelogram for the low-pass filtered absolute returns, obtained by annihilating periods in excess of one day, exhibit a striking hyperbolic rate of decay. Ökonometrisches Modell Assets (Accounting) Prices Econometric models Foreign exchange market Econometric models Rate of return Econometric models Bollerslev, Tim 1958- Verfasser (DE-588)128603593 aut Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 5752 (DE-604)BV002801238 5752 http://papers.nber.org/papers/w5752.pdf kostenfrei Volltext |
| spellingShingle | Andersen, Torben Bollerslev, Tim 1958- Heterogeneous information arrivals and return volatility dynamics uncovering the long-run in high frequency returns National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Ökonometrisches Modell Assets (Accounting) Prices Econometric models Foreign exchange market Econometric models Rate of return Econometric models |
| title | Heterogeneous information arrivals and return volatility dynamics uncovering the long-run in high frequency returns |
| title_auth | Heterogeneous information arrivals and return volatility dynamics uncovering the long-run in high frequency returns |
| title_exact_search | Heterogeneous information arrivals and return volatility dynamics uncovering the long-run in high frequency returns |
| title_full | Heterogeneous information arrivals and return volatility dynamics uncovering the long-run in high frequency returns Torben G. Andersen ; Tim Bollerslev |
| title_fullStr | Heterogeneous information arrivals and return volatility dynamics uncovering the long-run in high frequency returns Torben G. Andersen ; Tim Bollerslev |
| title_full_unstemmed | Heterogeneous information arrivals and return volatility dynamics uncovering the long-run in high frequency returns Torben G. Andersen ; Tim Bollerslev |
| title_short | Heterogeneous information arrivals and return volatility dynamics |
| title_sort | heterogeneous information arrivals and return volatility dynamics uncovering the long run in high frequency returns |
| title_sub | uncovering the long-run in high frequency returns |
| topic | Ökonometrisches Modell Assets (Accounting) Prices Econometric models Foreign exchange market Econometric models Rate of return Econometric models |
| topic_facet | Ökonometrisches Modell Assets (Accounting) Prices Econometric models Foreign exchange market Econometric models Rate of return Econometric models |
| url | http://papers.nber.org/papers/w5752.pdf |
| volume_link | (DE-604)BV002801238 |
| work_keys_str_mv | AT andersentorben heterogeneousinformationarrivalsandreturnvolatilitydynamicsuncoveringthelongruninhighfrequencyreturns AT bollerslevtim heterogeneousinformationarrivalsandreturnvolatilitydynamicsuncoveringthelongruninhighfrequencyreturns |