Scaling and memory in the return intervals of realized volatility

Fei Ren, Gao-Feng Gu and Wei-Xing Zhou

Physica A: Statistical Mechanics and its Applications, 2009, vol. 388, issue 22, 4787-4796

Abstract: We perform return interval analysis of 1-min realized volatility defined by the sum of absolute high-frequency intraday returns for the Shanghai Stock Exchange Composite Index (SSEC) and 22 constituent stocks of SSEC. The scaling behavior and memory effect of the return intervals between successive realized volatilities above a certain threshold q are carefully investigated. In comparison with the volatility defined by the closest tick prices to the minute marks, the return interval distribution for the realized volatility shows a better scaling behavior since 20 stocks (out of 22 stocks) and the SSEC pass the Kolmogorov–Smirnov (KS) test and exhibit scaling behaviors, among which the scaling function for 8 stocks could be approximated well by a stretched exponential distribution revealed by the KS goodness-of-fit test under the significance level of 5%. The improved scaling behavior is further confirmed by the relation between the fitted exponent γ and the threshold q. In addition, the similarity of the return interval distributions for different stocks is also observed for the realized volatility. The investigation of the conditional probability distribution and the detrended fluctuation analysis (DFA) show that both short-term and long-term memory exists in the return intervals of realized volatility.

Keywords: Econophysics; Realized volatility; Return interval; Scaling; Long memory (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (16)

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Working Paper: Scaling and memory in the return intervals of realized volatility (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:388:y:2009:i:22:p:4787-4796

DOI: 10.1016/j.physa.2009.08.009

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