Holidays, weekends and range-based volatility

Holidays, weekends and range-based volatility

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Holidays, weekends and range-based volatility

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Díaz Mendoza, Ana Carmen; Pardo Tornero, Ángel
This document is a artículoDate2020
This study analyses the effect of non-trading periods on the forecasting ability of S&P500 index range-based volatility models. We find that volatility significantly diminishes on the first trading day after holidays and weekends, but not after long weekends. Our findings indicate that models that include autoregressive terms that interact with dummies that allow us to capture changes in volatility levels after interrupting periods provide greater explanatory power than simple autoregressive models. Therefore, the shorter the length of the non-trading periods between two trading days, the higher the overestimation of the volatility if this effect is not considered in volatility forecasting.

    Díaz Mendoza, Ana Carmen Pardo Tornero, Ángel 2020 Holidays, weekends and range-based volatility North American Journal Of Economics And Finance 52

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