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- Title
Heterogeneous Information Arrivals and Return Volatility Dynamics: Uncovering the Long-Run in High Frequency Returns.
- Authors
Anderson, Torben G.; Bollerslev, Tim
- Abstract
Recent empirical evidence suggests that the interdaily volatility clustering for most speculative returns are best characterized by a slowly mean-reverting fractionally integrated process. Meanwhile, much shorter lived volatility dynamics are typically observed with high frequency intradaily returns. The present article demonstrates, that by interpreting the volatility as a mixture of numerous heterogeneous short-run information arrivals, the observed volatility process may exhibit long-run dependence. As such, the long-memory characteristics constitute an intrinsic feature of the return generating process, rather than the manifestation of occasional structural shifts. These ideas are confirmed by our analysis of a one-year time series of five-minute Deutschemark-U.S. Dollar exchange rates.
- Subjects
MARKET volatility; FINANCIAL markets; FOREIGN exchange rates; MARK (German currency); U.S. dollar; SPECULATION; SHORT run (Economics); TIME &; economic reactions; LONG run (Economics); INTELLECTUAL capital
- Publication
Journal of Finance (Wiley-Blackwell), 1997, Vol 52, Issue 3, p975
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/j.1540-6261.1997.tb02722.x