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Publicação
Intraday volatility estimation in high-frequency data using order book information
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Orientador(es)
Resumo(s)
This research conducts high-frequency intraday volatility estimations on the Euro Stoxx 50
Future under the multiplicative component GARCH framework, where the conditional
volatility of high-frequency returns is decomposed into a daily, diurnal and stochastic intraday
component. In contrast to existent research, this research covers a relatively long period of 423
trading days corresponding to about 345,000 1-minute observations. This study reveals that
return series derived from the Limit Order Book have superior model features compared to
simple trade returns. We find that these returns overcome the shortcomings of the welldocumented
microstructure noise. Standardized residuals follow a white noise process and
follow more closely a normal distribution compared to simple trade returns. However, this
comes at the cost of larger coefficient instability and larger outliers in the estimated residuals.
Descrição
Palavras-chave
GARCH Volatility estimation High-frequency data Limit order book