The Distribution of Index Futures Realized Volatility Under Seasonality and Microstructure Noise

Posted: 11 Jan 2019 Last revised: 15 Sep 2020

See all articles by Nuria Alemany

Nuria Alemany

Jaume I University - Department of Finance and Accounting

Vicent Aragó

Jaume I University - Department of Finance and Accounting

Enrique Salvador

Universitat Jaume I - Department of Finance and Accounting

Date Written: September 1, 2018

Abstract

We employ high-frequency returns at different frequencies from the CAC and DAX index futures to deduce the distributional properties of return volatility under intraday seasonality and microstructure effects. Results reveal that after accounting for these features, the distribution evolves to meet the normal distribution and this adjustment is more accurate for frequencies ranging from 10 to 30 minutes. The consideration of both features also reveals lower persistence and lower asymmetric behaviour of volatility. Finally, the consequences of these market imperfections on the multivariate distribution (and in correlations) have a great economic impact even in simple investment decisions.

Keywords: high-frequency data, intraday periodic component, Fourier Flexible Form, realized volatility, microstructure noise, distribution

JEL Classification: G11, G15

Suggested Citation

Alemany, Nuria and Aragó, Vicent and Salvador, Enrique, The Distribution of Index Futures Realized Volatility Under Seasonality and Microstructure Noise (September 1, 2018). Available at SSRN: https://ssrn.com/abstract=3309059

Nuria Alemany (Contact Author)

Jaume I University - Department of Finance and Accounting ( email )

Avda Sos Baynat S/N
Castello de la Plana, Castello 12071
Spain
+34‐964‐387151 (Phone)
+34964‐728565 (Fax)

HOME PAGE: http://www.uji.es/departaments/cofin/

Vicent Aragó

Jaume I University - Department of Finance and Accounting ( email )

Avda Sos Baynat s/N
Castellón, 12071
Spain

Enrique Salvador

Universitat Jaume I - Department of Finance and Accounting ( email )

Castellon
E-12071 Castello de la Plana, Castellón de la Plana 12071
Spain

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