The distribution of realized stock return volatility

Torben G. Andersen, Tim Bollerslev, Francis X. Diebold*, Heiko Ebens

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1062 Scopus citations

Abstract

We examine "realized" daily equity return volatilities and correlations obtained from high-frequency intraday transaction prices on individual stocks in the Dow Jones Industrial Average. We find that the unconditional distributions of realized variances and covariances are highly right-skewed, while the realized logarithmic standard deviations and correlations are approximately Gaussian, as are the distributions of the returns scaled by realized standard deviations. Realized volatilities and correlations show strong temporal dependence and appear to be well described by long-memory processes. Finally, there is strong evidence that realized volatilities and correlations move together in a manner broadly consistent with latent factor structure.

Original languageEnglish (US)
Pages (from-to)43-76
Number of pages34
JournalJournal of Financial Economics
Volume61
Issue number1
DOIs
StatePublished - Jul 2001

Keywords

  • C10
  • C20
  • Correlation
  • Equity markets
  • G10
  • High-frequency data
  • Integrated volatility
  • Long memory

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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