Volatility Dynamics and Heterogeneous Markets

David Gordon McMillan, A Speight

    Research output: Contribution to journalArticlepeer-review

    7 Citations (Scopus)

    Abstract

    Recent research has suggested that intra-day volatility may possess a component structure, resulting either from the arrival of heterogeneous information or the actions of heterogeneous market agents. This paper reports direct evidence for the existence of such components in S&P500 index and DM/$ exchange rate data. Estimation of a FIGARCH model supports the contention that volatility dynamics result from multiple sources. Using a HARCH conditional variance model which defines volatility components over differing time horizons, confirmatory evidence of heterogeneous components is reported, in which context the impact of high-frequency speculation and noise-trading are particularly apparent. Copyright (c) 2006 John Wiley & Sons, Ltd.

    Original languageEnglish
    Pages (from-to)115-121
    Number of pages7
    JournalInternational Journal of Finance and Economics
    Volume11
    DOIs
    Publication statusPublished - Apr 2006

    Keywords

    • intra-day
    • heterogeneous markets
    • HARCH
    • LONG MEMORY
    • MODELS
    • HETEROSKEDASTICITY
    • PERSISTENCE
    • INFORMATION
    • RETURNS
    • VOLUME
    • GARCH

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