David Kim

I.

• 3 stocks (1997 – 2010)• Calculate: RV, BV (Continuous Variation), J• Apply models to entire sample– Corsi (2009): HAR-RV– Andersen, Bollerslev and Diebold (2006): HAR-RV-J– Corsi and Renó (2009): LHAR-CJ***– Tests:• Significance of coefficients***• Use BIC to evaluate three models***

David Kim

Data Set

• BHI (Baker Hughes Incorporated)– April 9, 1997 – December 30, 2010 (3,421 days)

• ETR (Entergy Corporation)– April 9, 1997 – December 30, 2010 (3,418 days)

• HNZ (H.J. Heinz Company)– April 9, 1997 – December 30, 2010 (3,419 days)

David Kim

Realized Variance

David Kim

Bipower Volatility (CV)

• Barndorff-Nielsen and Shephard (2003)

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Jumps

• Andersen, Bollerslev, Diebold (2007)

David Kim

HAR-RV Model

• Corsi (2009)

– Volatilities are realized over differing interval sizes • 1, 5 and 22 (daily, weekly and monthly)

David Kim

HAR-RV

  BHI 

ETR 

HZN 

c 1.61E-14 -3.17E-15 2.66E-14

1.35E-14 1.86E-14 -3.38E-15 -2.96E-15 2.45E-14 2.87E-14

Beta(d) 1.00E+00 1.00E+00 1

1 1 1 1 1 1

Beta(w) 2.60E-16 2.08E-17 -7.05E-16

7.48E-17 4.45E-16 -4.22E-18 4.59E-17 -9.87E-16 -4.24E-16

Beta(m) -4.32E-16 1.11E-16 -3.63E-16

-5.85E-16 -2.80E-16 9.03E-17 1.31E-16 -6.13E-16 -1.12E-16

David Kim

HAR-RV-J Model

• Andersen, Bollerslev and Diebold (2007)

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HAR-RV-J  BHI

 ETR 

HZN 

Beta 2.33E-15 1.78E+00 1.376937531

  3.74E-16 4.29E-15 1.338525526 2.219085699 0.9559449 1.797930163

Beta(d) 1 0.956533345 0.893682021

  1 1 0.917549045 0.995517645 0.847309026 0.940055016

Beta(w) 1.87E-16 0.00E+00 0

  4.77E-17 3.27E-16 0 0 0 0

Beta(m) -1.57E-16 -9.57E-02 -0.02105916

  -2.72E-16 -4.22E-17 -0.136421601 -0.054971747 -0.070128129 0.02800981

Beta(j) -6.43E-15 3.25E+00 4.261430541

  -7.11E-15 -5.75E-15 2.971955832 3.537928142 3.896065591 4.626795491

David Kim

LHAR-CJ Model

• Corsi and Renò (2009)

David Kim

II.

• Sub-period analysis– Break 1997 – 2010 data into: • 97 – 02, 03 – 06, 07 – 10• Do results differ?

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III.

• Forecasting– Estimate model for 1997 – 2009• Forecast for 2010

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David Kim

BHI

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ETR

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HNZ

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Z-statistics (max version)

• 0.999 significance level