Research output: Working paper/Preprint › Working paper › Research
Volatility Discovery. / Dias, Gustavo Fruet; Scherrer, Cristina; Papailias, Fotis.
Aarhus : Institut for Økonomi, Aarhus Universitet, 2016.Research output: Working paper/Preprint › Working paper › Research
}
TY - UNPB
T1 - Volatility Discovery
AU - Dias, Gustavo Fruet
AU - Scherrer, Cristina
AU - Papailias, Fotis
PY - 2016/2/24
Y1 - 2016/2/24
N2 - The price discovery literature investigates how homogenous securities traded on different markets incorporate information into prices. We take this literature one step further and investigate how these markets contribute to stochastic volatility (volatility discovery). We formally show that the realized measures from homogenous securities share a fractional stochastic trend, which is a combination of the price and volatility discovery measures. Furthermore, we show that volatility discovery is associated with the way that market participants process information arrival (market sensitivity). Finally, we compute volatility discovery for 30 actively traded stocks in the U.S. and report that Nyse and Arca dominate Nasdaq.
AB - The price discovery literature investigates how homogenous securities traded on different markets incorporate information into prices. We take this literature one step further and investigate how these markets contribute to stochastic volatility (volatility discovery). We formally show that the realized measures from homogenous securities share a fractional stochastic trend, which is a combination of the price and volatility discovery measures. Furthermore, we show that volatility discovery is associated with the way that market participants process information arrival (market sensitivity). Finally, we compute volatility discovery for 30 actively traded stocks in the U.S. and report that Nyse and Arca dominate Nasdaq.
KW - volatility persistency, realized variance, fractionally cointegrated vector autoregressive (FCVAR), price discovery, high-frequency data
M3 - Working paper
T3 - CREATES Research Paper
BT - Volatility Discovery
PB - Institut for Økonomi, Aarhus Universitet
CY - Aarhus
ER -