Implementing Intraday Model-Free Implied Volatility for Individual Equities to Analyze the Return–Volatility Relationship

Martin G. Haas and Franziska J. Peter ()
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Martin G. Haas: Department of Corporate Management and Economics, Zeppelin University Am Seemooser Horn 20, 88045 Friedrichshafen, Germany
Franziska J. Peter: Department of Corporate Management and Economics, Zeppelin University Am Seemooser Horn 20, 88045 Friedrichshafen, Germany

JRFM, 2024, vol. 17, issue 1, 1-19

Abstract: We implement the VIX methodology on intraday data of a large set of individual equity options. We thereby consider approaches based on monthly option contracts, weekly option contracts, and a cubic spline interpolation approach. Relying on 1 min, 10 min, and 60 min model-free implied volatility measures, we empirically examine the individual equity return–volatility relationship on the intraday level using quantile regressions. The results confirm a negative contemporaneous link between stock returns and volatility, which is more pronounced in the tails of the distributions. Our findings hint at behavioral biases causing the asymmetric return–volatility link rather than the leverage and volatility-feedback effects.

Keywords: model-free implied volatility; individual equity options; intraday volatility; leverage; quantile regressions (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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