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| Author: | Bollen, B. Inder, B. |
| Title: | Estimating daily volatility in financial markets utilizing intraday data |
| Journal: | Journal of Empirical Finance
2002 : DEC, VOL. 9:5, p. 551-562 |
| Index terms: | Stock markets Finance Volatility Models |
| Language: | eng |
| Abstract: | This study proposes a new approach to the estimation of daily realised volatility in financial markets from intraday data. Initially, an examination of intraday returns on S&P 500 Index Futures reveals that returns can be characterised by heteroscsedasticity and time-varying auto-correlation. After reviewing a number of daily realized volatility estimators cited in the literature, it is concluded that these estimators are based on a number of restrictive assumptions. This paper uses a weak set of assumptions about the data generating process for intraday returns, incl. transaction returns, given in den Haan and Levin in den Haan, W.J. Levin, A. 1996, etc. These assumptions allow the VARHAC estimator to be employed in the estimation of daily realized volatility. An empirical analysis of the VARHAC daily volatility estimator employing intraday transaction returns concludes that this estimator performs well in comparison to other estimators cited in the literature. |
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