Long Memory and Periodicity in Intraday Volatility of Stock Index Futures
43 Pages Posted: 25 Aug 2009
Date Written: July 8, 2009
This paper investigates the intraday volatility pattern of the E-mini SP500 hourly returns. In order to account for the observed long memory and periodicity in returns volatility we introduce the Fractionally Integrated Periodic EGARCH and the Seasonal Fractional Integrated Periodic EGARCH. For both models we compute the population kurtosis and the autocorrelation function of power transformations of absolute returns. The results confirm that volatility of hourly returns sampled over the 24 hours across different markets are characterized by strong seasonal pattern with a statistically significant persistence.
Keywords: long-range dependence, periodic models, stock index futures
JEL Classification: C22, G13
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