Long Memory Volatility Persistence in High Frequency Precious Metals Returns PDF Download
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Author: Kashif Saleem
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
Using high frequency data, this paper examines the long memory property in the conditional volatility of the precious metals return series at different time frequencies using FIGARCH models. Very significant long memory characteristics have been detected in absolute returns by using Semiparametric local Whittle estimation of the long memory parameter. Estimation of the long memory parameter across many different data sampling frequencies gives consistent estimates of the long memory parameter, indicating that the series are exactly to show some degree of self-similarity. Results indicate that the long memory property remains quite consistent across different time frequencies for both unconditional and conditional volatility measures. This study is useful for investors and traders (with different trading horizons) and it can be used in predicting expected future volatility and in designing and implementing trading strategies at different time frequencies.
Author: Kashif Saleem
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
Using high frequency data, this paper examines the long memory property in the conditional volatility of the precious metals return series at different time frequencies using FIGARCH models. Very significant long memory characteristics have been detected in absolute returns by using Semiparametric local Whittle estimation of the long memory parameter. Estimation of the long memory parameter across many different data sampling frequencies gives consistent estimates of the long memory parameter, indicating that the series are exactly to show some degree of self-similarity. Results indicate that the long memory property remains quite consistent across different time frequencies for both unconditional and conditional volatility measures. This study is useful for investors and traders (with different trading horizons) and it can be used in predicting expected future volatility and in designing and implementing trading strategies at different time frequencies.
Author: Lucia Morales
Publisher:
ISBN:
Category :
Languages : en
Pages : 27
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Book Description
This study examines volatility persistence on precious metals returns taking into account oil returns and the three world major stock equity indices (Dow Jones Industrials, FTSE 100, and Nikkei 225) using daily data over the sample period January 1995- May 2008. We first determine when large changes in the volatility of each market returns occur, by identifying major global events that would increase the volatility of these markets; the Iterated Cumulative Sums of Squares (ICSS) algorithm helps identify the break points or sudden changes in the variance of returns in each market using the standardized residuals obtained through the GARCH(1,1) mean equation. Our main results identify a clear relationship between precious metals returns and oil returns, while the interaction between precious metals and stock returns seems to be an independent one. In relation to volatility persistence, the results are showing clear evidence of high volatility persistence between these markets.
Author: Julien Chevallier
Publisher: Routledge
ISBN: 1351669095
Category : Business & Economics
Languages : en
Pages : 381
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Book Description
This book provides an up-to-date series of advanced chapters on applied financial econometric techniques pertaining the various fields of commodities finance, mathematics & stochastics, international macroeconomics and financial econometrics. Financial Mathematics, Volatility and Covariance Modelling: Volume 2 provides a key repository on the current state of knowledge, the latest debates and recent literature on financial mathematics, volatility and covariance modelling. The first section is devoted to mathematical finance, stochastic modelling and control optimization. Chapters explore the recent financial crisis, the increase of uncertainty and volatility, and propose an alternative approach to deal with these issues. The second section covers financial volatility and covariance modelling and explores proposals for dealing with recent developments in financial econometrics This book will be useful to students and researchers in applied econometrics; academics and students seeking convenient access to an unfamiliar area. It will also be of great interest established researchers seeking a single repository on the current state of knowledge, current debates and relevant literature.
Author: Jihyun Lee
Publisher:
ISBN:
Category :
Languages : en
Pages : 57
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Book Description
This study investigates the relationship between the return on a stock index and its volatility using high frequency data. Two well-known hypotheses are reexamined: the leverage effect and the volatility feedback effect hypotheses. In an analysis of the five-minute data from the Samp;P500 index, two distinct characteristics of high frequency data were found. First, it was noted that the sign of the relationship between the smallest wavelet scale components for return and volatility differs from those between other scale components. Second, it was found that long memory exists in the daily realized volatility. The study further demonstrates how these findings affect the risk and return relationship.In the regression of changes in volatility on returns, it was found that the leverage effect does not appear in intraday data, in contrast to the results for daily data. It is believed that the difference can be attributed to the different relationships between scale components. By applying wavelet multiresolution analysis, it becomes clear that the leverage effect holds true between return and volatility components with scales equal to or larger than twenty minutes. However, these relationships are obscured in a five-minute data analysis because the smallest scale component accounts for a dominant portion of the variation of return. In testing the volatility feedback hypothesis, a modified model was used to incorporate apparent long memory in the daily realized volatility. This makes both sides of the test model balanced in integration order. No evidence of a volatility feedback effect was found under these stipulations.The results of this study reinforce the horizon dependency of the relationships. Hence, investors should assume different risk-return relationships for each horizon of interest. Additionally, the results show that the introduction of the long memory property to the proposed model is critical in the testing of risk-return relationships.
Author: Jonathan A. Batten
Publisher:
ISBN:
Category :
Languages : en
Pages : 29
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Book Description
Given the increased attention of precious metals by investors and the finance literature as well as the growth of high frequency trading, the behaviour of intraday precious metal markets is of great interest and importance. Therefore, this paper examines the stylized facts, correlation and interaction between volatility and returns at the 5-minute frequency of gold, silver, platinum and palladium from May 2000 to April 2015. We study the full sample period, as well as three sub-samples to determine how high-frequency data of precious metals have developed over time. We find that over the full sample period that the number of trades has increased substantially over time for each precious metal while the bid-ask spread has narrowed over time, indicating an increase in liquidity and efficiency. We also find strong evidence of periodicity in returns, volatility, volume and bid-ask spread. Returns and volume both experience strong intraday periodicity linked to the opening and closing of major markets around the world while the BAS is at its lowest when European markets are open. We also show a bilateral Granger causality between returns and volatility of each precious metal, which holds for the vast majority subsamples.
Author: J. D. Byers
Publisher:
ISBN:
Category : Capital market
Languages : en
Pages : 18
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Book Description
Author: Geeta Duppati
Publisher:
ISBN:
Category :
Languages : en
Pages : 13
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Book Description
This article analyzed the presence of long memory in volatility in 5 Asian equity indices namely SENSEX, CNIA, NIKKEI225, KO11 and FTSTI, using 5 minutes intraday return series ranging from 05-jan-2015 to 06-Aug-2015. The study employed ARFIMA-FIGARCH model and ARFIMA-APARCH model and compared them with GARCH (1,1) model and APARACH(1,1) in terms of in-sample forecast accuracy. The results confirmed the presence of long memory in both the return and volatility series for all the five markets under study. Among the group, CNIA and STI showed most persistence in both the return and conditional volatility. In terms of forecast measures, the long-memory GARCH models were found to be performing better compared to the short-memory GARCH models.
Author: Prasad V. Bidarkota
Publisher:
ISBN:
Category : Dividends
Languages : en
Pages : 50
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Book Description
Author: John Cotter
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Accurate volatility modelling is paramount for optimal risk management practices. One stylized feature of financial volatility that impacts the modelling process is long memory explored in this paper for alternative risk measures, observed absolute and squared returns for high frequency intraday UK futures. Volatility series for three different asset types, using stock index, interest rate and bond futures are analysed. Long memory is strongest for the bond contract. Long memory is always strongest for the absolute returns series and at a power transformation of k
Author: Torben G. Andersen
Publisher:
ISBN:
Category : Assets (Accounting)
Languages : en
Pages : 32
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Book Description
Recent empirical evidence suggests that the long-run dependence in financial market volatility is best characterized by a slowly mean-reverting fractionally integrated process. At the same time, much shorter-lived volatility dependencies are typically observed with high-frequency intradaily returns. This paper draws on the information arrival, or mixture-of-distributions hypothesis interpretation of the latent volatility process in rationalizing this behavior. By interpreting the overall volatility as the manifestation of numerous heterogeneous information arrivals, sudden bursts of volatility typically will have both short-run and long-run components. Over intradaily frequencies, the short-run decay stands out most clearly, while the impact of the highly persistent processes will be dominant over longer horizons. These ideas are confirmed by our empirical analysis of a one-year time series of intradaily five-minute Deutschemark - U.S. Dollar returns. Whereas traditional time series based measures for the temporal dependencies in the absolute returns give rise to very conflicting results across different intradaily sampling frequencies, the corresponding semiparametric estimates for the order of fractional integration remain remarkably stable. Similarly, the autocorrelogram for the low-pass filtered absolute returns, obtained by annihilating periods in excess of one day, exhibit a striking hyperbolic rate of decay.
