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

Torben G. Andersen, Tim Bollerslev

Research output: Contribution to journalArticlepeer-review

355 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)975-1005
Number of pages31
JournalJournal of Finance
Volume52
Issue number3
DOIs
StatePublished - Jul 1997

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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