Common intraday periodicity

Hecq, Alain;Laurent, Sébastien;Palm, Franz C.
(2012) Journal of Financial Econometrics — Vol. 10, n° 2, p. 325-353 (2012)

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Authors
  • Hecq, Alain
    Author
  • Laurent, SébastienUCLouvain
    Author
  • Palm, Franz C.
    Author
Abstract
Using a reduced rank regression framework as well as information criteria, we investigate the presence of commonalities in the intraday periodicity, a dominant feature in the return volatility of most intraday financial time series. We find that the test has little size distortion and reasonable power even in the presence of jumps. We also find that only three factors are needed to describe the intraday periodicity of 30 U.S. asset returns sampled at the 5-minute frequency. Interestingly, we find that for most series, the models imposing these commonalities deliver better forecasts of the conditional intraday variance than those where the intraday periodicity is estimated for each asset separately. © The Author 2011. Published by Oxford University Press. All rights reserved.
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Hecq, A., Laurent, S., & Palm, F. C. (2012). Common intraday periodicity. Journal of Financial Econometrics, 10(2), 325-353. https://doi.org/10.1093/jjfinec/nbr012 (Original work published 2012)