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Nonparametric Realized Volatility Estimation in the International Equity Markets

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Nonparametric Realized Volatility Estimation in the International Equity Markets

Dimitrios I. Vortelinos & Dimitrios D. Thomakos

International Review of Financial Analysis
Volume 28, June 2013, Pages 34-45


Abstract. Using high-frequency intraday data, we construct, test and model seven new realized volatility estimators for six international equity indices. We detect jumps in these estimators, construct the jump components of volatility and perform various tests on their properties. Then we use the class of heterogeneous autoregressive (HAR) models for assessing the relevant effects of jumps on volatility. Our results expand and complement the previous literature on the nonparametric realized volatility estimation in terms of volatility jumps being examined and modeled for the international equity market, using such a variety of new realized volatility estimators. The selection of realized volatility estimator greatly affects jump detection, magnitude and modeling. The properties each volatility estimator tries to incorporate affect the detection, magnitude and properties of jumps. These volatility-estimation and jump properties are also evident in jump modeling based on statistical and economic terms.

Keywords. Realized volatility, Optimal sampling, Kernels, Two scales, Moving average, Long memory, Jumps, Heterogeneous autoregressive models

DOI. 10.1016/j.irfa.2013.02.010


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