Intra-day Futures Price Volatility: Information Effects and Variance Persistence

P R Locke and C L Sayers

Journal of Applied Econometrics, 1993, vol. 8, issue 1, 15-30

Abstract: This paper examines the role of the rate of information arrival proxy variables, as they relate to persistence in the variance structure of minute-by-minute S&P 500 Index Futures returns series. The role of contract volume, floor transactions, the number of price changes, executed order imbalance, and an information composite in reducing variance persistence is examined. All proxy variables are found to explain a significant amount of returns variance. While the characteristics of returns data vary daily, some evidence of remaining variance persistence is found, regardless of the definition of the rate of information arrival variable. Our results suggest that utilization of a pure ARCH-type model for high-frequency returns data implies a mis-specification. Copyright 1993 by John Wiley & Sons, Ltd.

Date: 1993
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