Intra-day volatility components in FTSE-100 stock index futures
✍ Scribed by Speight, Alan E.H.; McMillan, David G.; ap Gwilym, Owain
- Publisher
- John Wiley and Sons
- Year
- 2000
- Tongue
- English
- Weight
- 211 KB
- Volume
- 20
- Category
- Article
- ISSN
- 0270-7314
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✦ Synopsis
Recent research has suggested that intra-day volatility may contain both short-run and long-run components due to the existence of heterogeneous information flows or heterogeneous market agents (Andersen & Bollerslev, 1997a, 1997b;Mu ¨ller et al., 1997). We report direct evidence for the existence of such a volatility decomposition in intra-day UK FTSE-100 futures returns data at frequencies of one hour and higher using the permanent-transitory component variance model of Engle and Lee (1993). Moreover, the transitory component identified exhibits rapid decay, volatility at the half-day frequency being completely dominated by the highly persistent permanent component. The model also is able to capture all dependency within the data at frequencies of one hour and lower.