The distribution of index futures realised volatility under seasonality and microstructure noise
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INVESTIGACIONMetadata
Title
The distribution of index futures realised volatility under seasonality and microstructure noiseDate
2020-09-01Publisher
ElsevierBibliographic citation
ALEMANY, Nuria; ARAGÓ, Vicent; SALVADOR, Enrique. The distribution of index futures realised volatility under seasonality and microstructure noise. Economic Modelling, 2020, vol. 93, p. 398-414.Type
info:eu-repo/semantics/articlePublisher version
https://www.sciencedirect.com/science/article/pii/S0264999320311676Version
info:eu-repo/semantics/publishedVersionSubject
Abstract
Previous research documents that the distribution of realised volatility appears approximately log-normal. However, formal tests reject normality fairly convincingly, which may indicate intrinsic features in the ... [+]
Previous research documents that the distribution of realised volatility appears approximately log-normal. However, formal tests reject normality fairly convincingly, which may indicate intrinsic features in the intraday data series, namely, the presence of seasonal intraday patterns and microstructure noise. Because many models are based on a normality assumption, this must be verified in order to validate the results. We find departures from normality due to the seasonal and noise components of intraday data, such that, after controlling for both features, the volatility estimates follow a log-normal distribution. Our results reveal that failing to account for these market imperfections can have important implications for analyses of volatility transmission and for investment and hedging decisions. [-]
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Economic Modelling, 2020, v. 93Rights
http://rightsstatements.org/vocab/CNE/1.0/
info:eu-repo/semantics/openAccess
info:eu-repo/semantics/openAccess
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