Modelling the Impact of Overnight Surprises on Intra-daily Volatility

Giampiero Gallo

Econometrics Working Papers Archive from Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti"

Abstract: In this paper we evaluate the impact that stock returns recorded between market closing and opening the next business day have on intra-daily volatility. A simple test shows that the estimated volatility clustering of the intra-daily returns may be affected by a market opening surprise bias. An extension of the standard GARCH model is suggested here to include the effect of this surprise and is applied on a sample of largely traded US stocks. The performance of two specifications in which this effect is included is evaluated in an out-of-sample forecasting exercise relative to their standard counterparts.

Keywords: Volatility forecasting; univariate GARCH; market opening surprise bias. (search for similar items in EconPapers)
Pages: 23 pages
Date: 2001
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Citations: View citations in EconPapers (19)

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Journal Article: Modelling the Impact of Overnight Surprises on Intra‐daily Volatility (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:fir:econom:wp2001_02

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