Heterogeneous information flows and intra-day volatility dynamics: evidence from the UK FTSE-100 stock index futures market

David McMillan and Alan Speight

Applied Financial Economics, 2006, vol. 16, issue 13, 959-972

Abstract: Recent research has suggested that intra-day volatility may possess a component structure due to heterogeneous information arrivals. This paper reports evidence for the existence of such components in FTSE-100 stock index futures returns data. Preliminary GARCH model estimates support previous evidence for other markets indicating the breakdown of theoretical GARCH temporal aggregation properties over the intra-day period. However, the fractional integration properties of absolute and squared returns, and FIGARCH conditional volatility model estimates, lend strong support to the contention that volatility dynamics results from multiple sources given the invariance of the fractional difference parameter estimates to the degree of intra-day data temporal aggregation.

Date: 2006
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DOI: 10.1080/09603100500426507

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