Modelling the Impact of Overnight Surprises on Intra‐daily Volatility

Giampiero Gallo ()

Australian Economic Papers, 2001, vol. 40, issue 4, 567-580

Abstract: In this paper we evaluate the impact that stock returns recorded between market closing and opening the next business day have on intra‐daily volatility. A simple test shows that the estimated volatility clustering of the intra‐daily returns may be affected by a market opening surprise bias. An extension of the standard GARCH model is suggested here to include the effect of this surprise and is applied on a sample of largely traded US stocks. The performance of two specifications in which this effect is included is evaluated in an out‐of‐sample forecasting exercise relative to their standard counterparts.

Date: 2001
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https://doi.org/10.1111/1467-8454.00142

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Working Paper: Modelling the Impact of Overnight Surprises on Intra-daily Volatility (2001)
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