Do Intraday Volatility Patterns Follow a ‘U’ Curve? Evidence from the Indian Market
17 Pages Posted: 1 May 2013
Date Written: April 23, 2013
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
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