Robust estimation of intraweek periodicity in volatility and jump detection.

C. Boudt, C. Croux, S.F.J.A. Laurent

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Opening, lunch and closing of financial markets induce a periodic component in the volatility of high-frequency returns. We show that price jumps cause a large bias in the classical periodicity estimators and propose robust alternatives. We find that accounting for periodicity greatly improves the accuracy of intraday jump detection methods. It increases the power to detect the relatively small jumps occurring at times for which volatility is periodically low and reduces the number of spurious jump detections at times of periodically high volatility. We use the series of detected jumps to estimate robustly the long memory parameter of the squared EUR/USD, GBP/USD and YEN/USD returns. (c) 2010 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)353-367
Number of pages15
JournalJournal of Empirical Finance
Volume18
Issue number2
DOIs
Publication statusPublished - Mar 2011

Keywords

  • High-frequency foreign exchange data
  • Jump detection
  • Long memory
  • Periodicity
  • MACROECONOMIC ANNOUNCEMENTS
  • RETURN VOLATILITY
  • INFORMATION
  • DYNAMICS
  • PATTERNS
  • MARKETS
  • MODELS
  • RUN

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