Do Intraday Volatility Patterns Follow a ‘U’ Curve? Evidence from the Indian Market

17 Pages Posted: 1 May 2013

See all articles by Aravind Sampath

Aravind Sampath

Indian Institute of Technology (IIT), Madras - Department of Management Studies

G. ArunKumar

Indian Institute of Technology (IIT), Madras

Date Written: April 23, 2013

Abstract

This study examines the ‘intraday’ volatility patterns of NSE’s Nifty Index from August 2000 to December 2003. The tick by tick index returns are categorized into three groups – opening price to thirty minutes after opening price (morning sample), thirty minutes after opening price to fifteen minutes before closing price (mid-day sample) and fifteen minutes before closing price to closing price (evening sample). Defining the tick by tick index returns as a measure of deviation between successive prices, new volatility estimates are constructed to compute intraday volatility. The volatility patterns across the samples suggest high volatility during the initial trading period which sustains till 30 opening minutes and further increasing volatility during the last 15 minutes of a trading day. Information bunching and presence of private information are attributed to morning and evening period volatilities respectively. The volatility of intraday index prices of Nifty follows a crude U shaped curve.

Keywords: Tick by tick index returns, Variability Parameter, Variability Ratio, Variability Patterns

Suggested Citation

Sampath, Aravind and ArunKumar, G., Do Intraday Volatility Patterns Follow a ‘U’ Curve? Evidence from the Indian Market (April 23, 2013). Available at SSRN: https://ssrn.com/abstract=2255391 or http://dx.doi.org/10.2139/ssrn.2255391

Aravind Sampath (Contact Author)

Indian Institute of Technology (IIT), Madras - Department of Management Studies ( email )

Chennai, Tamil Nadu 600036
India

G. ArunKumar

Indian Institute of Technology (IIT), Madras ( email )

Sardar Patel Road
Guindy
Chennai, TN Tamil Nadu 600036
India

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