Uncovering Long Memory in High Frequency UK Futures

28 Pages Posted: 10 Jul 2007

See all articles by John Cotter

John Cotter

University College Dublin; University of California, Los Angeles (UCLA) - Anderson School of Management

Date Written: 2005

Abstract

Accurate volatility modelling is paramount for optimal risk management practices. One stylized feature of financial volatility that impacts the modelling process is long memory explored in this paper for alternative risk measures, observed absolute and squared returns for high frequency intraday UK futures. Volatility series for three different asset types, using stock index, interest rate and bond futures are analysed. Long memory is strongest for the bond contract. Long memory is always strongest for the absolute returns series and at a power transformation of k < 1. The long memory findings generally incorporate intraday periodicity. The APARCH model incorporating seven related GARCH processes generally models the futures series adequately documenting ARCH, GARCH and leverage effects.

Keywords: Long Memory, APARCH, High Frequency Futures

Suggested Citation

Cotter, John, Uncovering Long Memory in High Frequency UK Futures (2005). Available at SSRN: https://ssrn.com/abstract=998493 or http://dx.doi.org/10.2139/ssrn.998493

John Cotter (Contact Author)

University College Dublin ( email )

School of Business, Carysfort Avenue
Blackrock, Co. Dublin
Ireland
353 1 716 8900 (Phone)
353 1 283 5482 (Fax)

HOME PAGE: http://www.ucd.ie/bankingfinance/staff/professorjohncotter/

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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