Nonlinear dynamics in high‐frequency intraday financial data: Evidence for the UK long gilt futures market
David G. McMillan and
Alan E. H. Speight
Journal of Futures Markets, 2002, vol. 22, issue 11, 1037-1057
Recent research investigating the properties of high‐frequency financial data has suggested that the stochastic nonlinearity widely present in such data may be characterized by heterogeneous components in conditional volatility, and nonlinear dependence of threshold autoregressive form due to market frictions. This article tests for the presence of such effects in intraday long gilt futures returns on the UK LIFFE market. Tests against the null of linearity indicate the significance of smooth transition autoregressive nonlinearities in such returns at the 5‐min frequency, which entails a first‐order autoregressive process with switching intercept. This nonlinear structure is robust to the presence of asymmetric and component structures in conditional variance, and consistent with the existence of heterogeneous traders facing different levels of transaction costs, noise trader risk, or capital constraints. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:1037–1057, 2002
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:22:y:2002:i:11:p:1037-1057
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