Fast and Slow Level Shifts in Intraday Stochastic Volatility

Fast and Slow Level Shifts in Intraday Stochastic Volatility

• Autor
• Hedibert F Lopes
• Co-autores
• Igor Martins , Audrone Virbickaite , Hoang Nguyen
• Resumo

• This paper proposes a mixed-frequency stochastic volatility model for intraday returns that captures fast and slow level shifts in the volatility level induced by news from both low-frequency

  variables and scheduled announcements. A MIDAS component describes slow-moving changes in volatility driven by daily variables, while an announcement component captures fast event-driven volatility bursts. Using 5-minute crude oil futures returns, we show that accounting for both fast and slow level shifts significantly improves volatility forecasts at intraday and daily horizons. The superior forecasts also translate into higher Sharpe ratios using the volatility-managed portfolio strategy.

• Palavras-chave
• Intraday volatility, high-frequency, announcements, MIDAS, oil, sparsity.
• Modalidade
• Comunicação oral
• Área Temática
• Econometria Financeira

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