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A discrete-time model for daily S & P500 returns and realized variations: Jumps and leverage effects

Publication ,  Journal Article
Bollerslev, T; Kretschmer, U; Pigorsch, C; Tauchen, G
Published in: Journal of Econometrics
June 1, 2009

We develop an empirically highly accurate discrete-time daily stochastic volatility model that explicitly distinguishes between the jump and continuous-time components of price movements using nonparametric realized variation and Bipower variation measures constructed from high-frequency intraday data. The model setup allows us to directly assess the structural inter-dependencies among the shocks to returns and the two different volatility components. The model estimates suggest that the leverage effect, or asymmetry between returns and volatility, works primarily through the continuous volatility component. The excellent fit of the model makes it an ideal candidate for an easy-to-implement auxiliary model in the context of indirect estimation of empirically more realistic continuous-time jump diffusion and Lévy-driven stochastic volatility models, effectively incorporating the interdaily dependencies inherent in the high-frequency intraday data. © 2009 Elsevier B.V. All rights reserved.

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Published In

Journal of Econometrics

DOI

ISSN

0304-4076

Publication Date

June 1, 2009

Volume

150

Issue

2

Start / End Page

151 / 166

Related Subject Headings

  • Econometrics
  • 4905 Statistics
  • 3802 Econometrics
  • 3801 Applied economics
  • 1403 Econometrics
  • 1402 Applied Economics
  • 0104 Statistics
 

Citation

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Bollerslev, T., Kretschmer, U., Pigorsch, C., & Tauchen, G. (2009). A discrete-time model for daily S & P500 returns and realized variations: Jumps and leverage effects. Journal of Econometrics, 150(2), 151–166. https://doi.org/10.1016/j.jeconom.2008.12.001
Bollerslev, T., U. Kretschmer, C. Pigorsch, and G. Tauchen. “A discrete-time model for daily S & P500 returns and realized variations: Jumps and leverage effects.” Journal of Econometrics 150, no. 2 (June 1, 2009): 151–66. https://doi.org/10.1016/j.jeconom.2008.12.001.
Bollerslev T, Kretschmer U, Pigorsch C, Tauchen G. A discrete-time model for daily S & P500 returns and realized variations: Jumps and leverage effects. Journal of Econometrics. 2009 Jun 1;150(2):151–66.
Bollerslev, T., et al. “A discrete-time model for daily S & P500 returns and realized variations: Jumps and leverage effects.” Journal of Econometrics, vol. 150, no. 2, June 2009, pp. 151–66. Scopus, doi:10.1016/j.jeconom.2008.12.001.
Bollerslev T, Kretschmer U, Pigorsch C, Tauchen G. A discrete-time model for daily S & P500 returns and realized variations: Jumps and leverage effects. Journal of Econometrics. 2009 Jun 1;150(2):151–166.
Journal cover image

Published In

Journal of Econometrics

DOI

ISSN

0304-4076

Publication Date

June 1, 2009

Volume

150

Issue

2

Start / End Page

151 / 166

Related Subject Headings

  • Econometrics
  • 4905 Statistics
  • 3802 Econometrics
  • 3801 Applied economics
  • 1403 Econometrics
  • 1402 Applied Economics
  • 0104 Statistics