The Empirical Distribution of Intradaily Stock Return Volatility

Posted: 15 Sep 1999

See all articles by Rong Chen

Rong Chen

Texas A&M University

David Ellis

Babson College - Finance Division

Robert Wood

University of Memphis - Fogelman College of Business and Economics

Date Written: July 1994

Abstract

We examine the distribution of intradaily volatility of common stock returns of a portfolio (updated annually) of the 250 most actively traded stocks on the NYSE for the sample period 1983-92. Our results suggest that there was a shift in the distribution of return volatility around 1985-86: both the level and dispersion of volatility increased significantly after 1985. We find that the well known 'U'-shaped pattern of both intradaily volatility and volume shifted almost uniformly upwards following 1985; moreover, the U-shape is present not merely in the level of volatility and volume, but in the dispersion also. We examine intradaily volatility and volume on triple witching days, and find that volume is significantly higher at the open but not the close, while the opposite is true for volatility. Finally, we model the joint relationship of volatility and volume and find it be complex and non-linear.

JEL Classification: G12, G19, C22

Suggested Citation

Chen, Rong and Ellis, David and Wood, Robert A., The Empirical Distribution of Intradaily Stock Return Volatility (July 1994). Available at SSRN: https://ssrn.com/abstract=5441

Rong Chen

Texas A&M University ( email )

Langford Building A
798 Ross St.
College Station, TX 77843-3137
United States

David Ellis (Contact Author)

Babson College - Finance Division ( email )

Babson Park, MA 02457-0310
United States
617-239-6435 (Phone)
617-239-6465 (Fax)

Robert A. Wood

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States
901-678-2670 (Phone)
901-678-3006 (Fax)

HOME PAGE: http://www.people.memphis.edu/~rwood/

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