Abstract
We provide a new framework for modeling trends and periodic patterns in high-frequency financial data. Seeking adaptivity to ever-changing market conditions, we enlarge the Fourier flexible form into a richer functional class: both our smooth trend and the seasonality are non-parametrically time-varying and evolve in real time. We provide the associated estimators and use simulations to show that they behave adequately in the presence of jumps and heteroskedastic and heavy-tailed noise. A study of exchange rate returns sampled from 2010 to 2013 suggests that failing to factor in the seasonality's dynamic properties may lead to misestimation of the intraday spot volatility.
Highlights
Over the last two decades, improved access to high-frequency data has offered a magnifying glass to study financial markets
In Panels 6a and 6b of Figure 6, we show the seasonality estimated as a sum of the four periodic components: the Fourier flexible form represents the average daily oscillation, the rolling Fourier flexible form is a wiggly estimate of the dynamics, and the synchrosqueezing transform extracts a smooth instantaneous seasonality
Our disentangling of instantaneous trend and seasonality of the intraday spot volatility is an extension of classical econometric models that provides adaptivity to ever-changing markets
Summary
Non-parametric estimation of intraday spot volatility: Disentangling Instantaneous Trend and Seasonality. Suggested Citation: Vatter, Thibault; Wu, Hau-Tieng; Chavez-Demoulin, Valérie; Yu, Bin (2015) : Non-parametric estimation of intraday spot volatility: Disentangling Instantaneous Trend and Seasonality, Econometrics, ISSN 2225-1146, MDPI, Basel, Vol 3, Iss. 4, pp. Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen. Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. Non-Parametric Estimation of Intraday Spot Volatility: Thibault Vatter 1, *, Hau-Tieng Wu 2 , Valérie Chavez-Demoulin 1 and Bin Yu 3. Received: 19 August 2015 / Accepted: 26 November 2015 / Published: 18 December 2015
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