Heterogeneous information arrivals and return volatility dynamics: Uncovering the long-run in high frequency returns

Journal Article (Journal Article)

Recent empirical evidence suggests that the interdaily volatility clustering for most speculative returns are best characterized by a slowly mean-reverting fractionally integrated process. Meanwhile, much shorter lived volatility dynamics are typically observed with high frequency intradaily returns. The present article demonstrates, that by interpreting the volatility as a mixture of numerous heterogeneous short-run information arrivals, the observed volatility process may exhibit long-run dependence. As such, the long-memory characteristics constitute an intrinsic feature of the return generating process, rather than the manifestation of occasional structural shifts. These ideas are confirmed by our analysis of a one-year time series of five-minute Deutschemark-U.S. Dollar exchange rates.

Full Text

Duke Authors

Cited Authors

  • Andersen, TG; Bollerslev, T

Published Date

  • January 1, 1997

Published In

Volume / Issue

  • 52 / 3

Start / End Page

  • 975 - 1005

International Standard Serial Number (ISSN)

  • 0022-1082

Digital Object Identifier (DOI)

  • 10.2307/2329513

Citation Source

  • Scopus