Nonlinear dynamics in high-frequency intraday financial data: Evidence for the UK long gilt futures market
✍ Scribed by David G. McMillan; Alan E. H. Speight
- Publisher
- John Wiley and Sons
- Year
- 2002
- Tongue
- English
- Weight
- 151 KB
- Volume
- 22
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
✦ Synopsis
Abstract
Recent research investigating the properties of high‐frequency financial data has suggested that the
stochastic nonlinearity widely present in such data may be characterized by heterogeneous components in
conditional volatility, and nonlinear dependence of threshold autoregressive form due to market frictions. This
article tests for the presence of such effects in intraday long gilt futures returns on the UK LIFFE market.
Tests against the null of linearity indicate the significance of smooth transition autoregressive nonlinearities
in such returns at the 5‐min frequency, which entails a first‐order autoregressive process with
switching intercept. This nonlinear structure is robust to the presence of asymmetric and component structures
in conditional variance, and consistent with the existence of heterogeneous traders facing different levels of
transaction costs, noise trader risk, or capital constraints. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark
22:1037–1057, 2002