Long memory and Periodicity in Intraday Volatility

Eduardo Rossi and Dean Fantazzini

No 15, DEM Working Papers Series from University of Pavia, Department of Economics and Management

Abstract: Intraday return volatilities are characterized by the contemporaneous presence of periodicity and long memory. This paper proposes two new parameterizations of the intraday volatility: the Fractionally Integrated Periodic EGARCH and the Seasonal Fractional Integrated Periodic EGARCH, which provide the required flexibility to account for both features. The periodic kurtosis and periodic autocorrelations of power transformations of the absolute returns are computed for both models. The empirical application shows that volatility of the hourly Emini S&P 500 futures returns are characterized by a periodic leverage effect coupled with a statistically significant long-range dependence. An out-of-sample forecasting comparison with alternative models shows that a constrained version of the FI-PEGARCH provides superior forecasts. A simulation experiment is carried out to investigate the effects that sample frequency has on the fractional differencing parameter estimate.

Keywords: Intraday volatility; Long memory; FI-PEGARCH; SFI-PEGARCH; Periodicmodels. (search for similar items in EconPapers)
JEL-codes: C22 C58 G13 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2012-11
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-for, nep-mst and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Long Memory and Periodicity in Intraday Volatility (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pav:demwpp:015

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