Abstract
This paper characterizes the volatility in the Japanese stock market based on a 4-year sample of 5-min Nikkei 225 returns from 1994 through 1997. The intradaily volatility exhibits a doubly U-shaped pattern associated with the opening and closing of the separate morning and afternoon trading sessions on the Tokyo Stock Exchange. This feature is consistent with market microstructure theories that emphasize the role of private and asymmetric information in the price formation process. Meanwhile, readily identifiable Japanese macroeconomic news announcements explain little of the day-to-day variation in the volatility, confirming previous findings for US equity markets. Furthermore, by appropriately filtering out the strong intradaily periodic pattern, the high-frequency returns reveal the existence of important long-memory interdaily volatility dependencies. This supports recent results stressing the importance of exploiting high-frequency intraday asset prices in the study of long-run volatility properties of asset returns.
Original language | English (US) |
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Pages (from-to) | 107-130 |
Number of pages | 24 |
Journal | Journal of International Financial Markets, Institutions and Money |
Volume | 10 |
Issue number | 2 |
DOIs | |
State | Published - Jun 2000 |
Funding
Andersen’s and Bollerslev’s research was supported by a grant from the NSF to the NBER. J. Cai gratefully acknowledges the financial support from RGC Competitive Earmarked Research Grants 1994–1996 and 1996–1998.
Keywords
- Announcement effects
- Arch
- High-frequency data
- Intraday periodicity
- Long-memory
- Nikkei 225
ASJC Scopus subject areas
- Finance
- Economics and Econometrics