Market trader heterogeneity and high frequency volatility dynamics: further evidence from intra-day FTSE-100 futures data

David G. McMillan and Alan E. H. Speight

Applied Financial Economics Letters, 2006, vol. 2, issue 2, pages 99-103

Abstract: Recent research has suggested that intra-day volatility may possess a component structure, though views differ as to whether this is the consequence of heterogeneous information arrival or the actions of heterogeneous market agents. Estimation results for a HARCH conditional variance model which defines volatility components over differing time horizons provides confirmatory evidence of heterogeneous market components and support for the interpretation of such components as resulting from the presence of different trader types, in which context the impact of high-frequency speculation and noise-trading are particularly apparent.

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