Journal Article

Common Intraday Periodicity

Alain Hecq, Sébastien Laurent and Franz C. Palm

in Journal of Financial Econometrics

Volume 10, issue 2, pages 325-353
Published in print March 2012 | ISSN: 1479-8409
Published online December 2011 | e-ISSN: 1479-8417 | DOI: https://dx.doi.org/10.1093/jjfinec/nbr012
Common Intraday Periodicity

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  • Econometric and Statistical Methods and Methodology: General
  • Multiple or Simultaneous Equation Models; Multiple Variables

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Using a reduced rank regression framework as well as information criteria, we investigate the presence of commonalities in the intraday periodicity, a dominant feature in the return volatility of most intraday financial time series. We find that the test has little size distortion and reasonable power even in the presence of jumps. We also find that only three factors are needed to describe the intraday periodicity of 30 U.S. asset returns sampled at the 5-minute frequency. Interestingly, we find that for most series, the models imposing these commonalities deliver better forecasts of the conditional intraday variance than those where the intraday periodicity is estimated for each asset separately.

Keywords: Common features; Intraday periodicity; Realized volatility; C10; C32

Journal Article.  9383 words.  Illustrated.

Subjects: Econometric and Statistical Methods and Methodology: General ; Multiple or Simultaneous Equation Models; Multiple Variables

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