Does realized volatility provide additional information?

Jianfeng Zhang and Wenxiu Hu

International Journal of Managerial Finance, 2013, vol. 9, issue 1, 70-87

Abstract: Purpose - – The purpose of this paper is to examine whether realized volatility can provide additional information on the volatility process to the GARCH and EGARCH model, based on the data of Chinese stock market. Design/methodology/approach - – The realized volatility is defined as the squared overnight return plus the close to open squared return of the period between the morning and afternoon session, to plus the sum of the squared f-minute returns between the trading hours during the relevant trading day. The methodology is a GARCH (EGARCH) model with added explanation variables in the variance equation. The estimation methodology is exact maximum likelihood estimation, using the BHHH algorithms for optimization. Findings - – There are some stocks for which realized volatility measures add information in the volatility process, but there are still quite a number of stocks for which they do not contain any additional information. The 30 minutes realized volatility measures outperform measures constructed on other time intervals. The firm size, turnover rate, and amplitude also partially explain the difference in realized volatility ' s explanatory power across firms. Research limitations/implications - – When analyzing the factors determining the role of realized volatility, as the difficulty of getting the data, ownership structure and ultimately ownerships are not taken into account, except for the turnover ratio, amplitude and size. Originality/value - – This study extends firstly this line of inquiry of realized volatility into the emerging Chinese stock market. Due to the unique institutional setting in China, the results of this study have played an important role on pricing warrant for domestic investors in the Chinese market.

Keywords: Realized volatility; GARCH model; EGARCH model; Additional information; Chinese market; China; Stock markets (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:v:9:y:2013:i:1:p:70-87

DOI: 10.1108/17439131311298539

Access Statistics for this article

International Journal of Managerial Finance is currently edited by Dr Alfred Yawson

More articles in International Journal of Managerial Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().