Non-Linear Dynamics in High Frequency Intra-Day Financial Data: Evidence for the UK Long Gilt Futures Market

David Gordon McMillan, A Speight

    Research output: Contribution to journalArticlepeer-review

    6 Citations (Scopus)

    Abstract

    Recent research investigating the properties of high-frequency Financial data has suggested that the stochastic nonlinearity widely present in such data may be characterized by heterogeneous components in conditional volatility, and nonlinear dependence of threshold autoregressive form due to market frictions. This article tests for the presence of such effects in intraday long gilt futures returns on the UK LIFFE market. Tests against the null of linearity indicate the significance of smooth transition autoregressive nonlinearities in such returns at the 5-min frequency, which entails a first-order autoregressive process with switching intercept. This nonlinear structure is robust to the presence of asymmetric and component structures in conditional variance, and consistent with the existence of heterogeneous traders facing different levels of transaction costs, noise trader risk, or capital constraints. (C) 2002 Wiley Periodicals, Inc.

    Original languageEnglish
    Pages (from-to)1037-1057
    Number of pages21
    JournalJournal of Futures Markets
    Volume22
    DOIs
    Publication statusPublished - Nov 2002

    Keywords

    • TRANSITION AUTOREGRESSIVE MODELS
    • RATIONAL-EXPECTATIONS ECONOMY
    • EXCHANGE-RATE
    • CONDITIONAL HETEROSKEDASTICITY
    • MACROECONOMIC NEWS
    • UNITED-KINGDOM
    • VOLATILITY
    • RETURNS
    • ARCH
    • SPECIFICATION

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