Dm-Dollar Volatility: Intraday Activity Patterns, Macroeconomic Announcements, and Longer Run Dependencies

69 Pages Posted: 17 Jul 2000 Last revised: 25 Mar 2008

See all articles by Torben G. Andersen

Torben G. Andersen

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER); Aarhus University - CREATES

Tim Bollerslev

Duke University - Finance; Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: October 1996

Abstract

This paper characterizes the volatility in the DM-dollar foreign exchange market using an annual sample of five-minute returns. Our modeling approach explicitly captures the pronounced intraday activity patterns, the strong macroeconomic announcement effects, and the volatility persistence, or ARCH effects, familiar from lower frequency returns. The different features are separately quantified and shown, in conjunction, to account for a substantial fraction of the realized return variability, both at the intradaily and daily levels. Moreover, we demonstrate how the high frequency returns, when properly modeled, constitute an extremely valuable and vastly underutilized resource for better understanding the volatility dynamics at the daily or lower frequencies.

Suggested Citation

Andersen, Torben G. and Bollerslev, Tim, Dm-Dollar Volatility: Intraday Activity Patterns, Macroeconomic Announcements, and Longer Run Dependencies (October 1996). NBER Working Paper No. w5783. Available at SSRN: https://ssrn.com/abstract=225590

Torben G. Andersen (Contact Author)

Northwestern University - Kellogg School of Management ( email )

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National Bureau of Economic Research (NBER) ( email )

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Aarhus University - CREATES ( email )

School of Economics and Management
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Tim Bollerslev

Duke University - Finance ( email )

Durham, NC 27708-0120
United States
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919-684-8974 (Fax)

Duke University - Department of Economics

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United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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