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What is the source of different levels of time-series return volatility? the intraday U-shaped pattern or time-series persistence

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Abstract

We use the NYSE industrial index, the NYSE utility index, and the NASDAQ industrial index to examine the relationship between short-run and long-run volatility. We establish that the NASDAQ index has substantially more daily volatility than the NYSE indices. The initial examination shows that the individual U-shaped intraday patterns of the two NYSE indices are roughly similar in both position and shape, while we find that NASDAQ U-shaped pattern is distinctively different in both position and shape. However, after controlling for conditional volatility in a GARCH model, the U-shaped intraday volatility patterns of all three indices are similar.

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Authors and Affiliations

  1. School of Business, Francis Marion University, 29501, Florence, SC

    Michael P. Hughes (Assistant Professor of Finance)

  2. Rawls College of Business, Finance Department, Texas Tech University, 79409-2101, Lubbock, TX

    Drew B. Winters (Associate Professor) & Jerry S. Rawls (Professor of Finance)

  3. The Federal Reserve Bank of St. Louis, St. Louis, USA

    Drew B. Winters (Associate Professor) & Jerry S. Rawls (Professor of Finance)

Authors
  1. Michael P. Hughes
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  2. Drew B. Winters
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  3. Jerry S. Rawls
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Corresponding author

Correspondence to Michael P. Hughes.

Additional information

We thank seminar participants at the 2001 FMA and 2004 AEF meetings for their comments. We also wish to thank Junsoo Lee for his inputs on time-series econometrics. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of St. Louis or the Board of Governors of the Federal Reserve System.

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Hughes, M.P., Winters, D.B. & Rawls, J.S. What is the source of different levels of time-series return volatility? the intraday U-shaped pattern or time-series persistence. J Econ Finan 29, 300–312 (2005). https://doi.org/10.1007/BF02761576

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