A discrete-time model for daily S & P500 returns and realized variations: Jumps and leverage effects

Tim Bollerslev, Uta Kretschmer, Christian Pigorsch and George Tauchen ()

Journal of Econometrics, 2009, vol. 150, issue 2, 151-166

Abstract: We develop an empirically highly accurate discrete-time daily stochastic volatility model that explicitly distinguishes between the jump and continuous-time components of price movements using nonparametric realized variation and Bipower variation measures constructed from high-frequency intraday data. The model setup allows us to directly assess the structural inter-dependencies among the shocks to returns and the two different volatility components. The model estimates suggest that the leverage effect, or asymmetry between returns and volatility, works primarily through the continuous volatility component. The excellent fit of the model makes it an ideal candidate for an easy-to-implement auxiliary model in the context of indirect estimation of empirically more realistic continuous-time jump diffusion and Lévy-driven stochastic volatility models, effectively incorporating the interdaily dependencies inherent in the high-frequency intraday data.

Keywords: Realized; volatility; Bipower; variation; Jumps; Leverage; effect; Simultaneous; equation; model (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (114)

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Related works:
Working Paper: A Discrete-Time Model for Daily S&P500 Returns and Realized Variations: Jumps and Leverage Effects (2010)
Working Paper: A Discrete-Time Model for Daily S&P500 Returns and Realized Variations: Jumps and Leverage Effects (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:150:y:2009:i:2:p:151-166

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