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Measuring and forecasting S&P 500 index-futures volatility using high-frequency data

✍ Scribed by Martin Martens

Publisher: John Wiley and Sons
Year: 2002
Tongue: English
Weight: 151 KB
Volume: 22
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.10016

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✦ Synopsis

Abstract

In the 24‐hr foreign exchange market, Andersen and Bollerslev measure and forecast volatility using
intraday returns rather than daily returns. Trading in equity markets only occurs during part of the day, and
volatility during nontrading hours may differ from the volatility during trading hours. This paper compares
various measures and forecasts of volatility in equity markets. In the absence of overnight trading it is shown
that the daily volatility is best measured by the sum of intraday squared 5‐min returns,
excluding the overnight return. In the absence of overnight trading, the best daily forecast of
volatility is produced by modeling overnight volatility differently from intraday volatility. © 2002 Wiley
Periodicals, Inc. Jrl Fut Mark 22:497–518, 2002

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