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Modelling the Intraday Return Volatility Process In The Australian Equity Market: An Examination Of The Role Of Information Arrival In S&P/Asx 50 Stocks. Discussion Paper No. 150

Worthington, Andrew C. & Higgs, Helen (2003) Modelling the Intraday Return Volatility Process In The Australian Equity Market: An Examination Of The Role Of Information Arrival In S&P/Asx 50 Stocks. Discussion Paper No. 150. . [Working Paper] (Unpublished)

Abstract

This paper examines the intraday return volatility process in Australian company stocks. The data set employed consists of five-minute returns, trading volumes and bid-ask spreads over the period 31 December 2002 to 4 March 2003 for the fifty national and multinational stocks comprising the S&P/ASX 50 index. GARCH is used to model the time-varying variance in the intraday return series and the inclusion of news arrival as proxied by the contemporaneous and lagged volume of trade and bid-ask spread is used as an exogenous explanatory variable. The results indicate strong persistence in volatility for the fifty stocks even with the contemporaneous and lagged volume of trade and bid-ask spread included as explanatory variables in the models. Overall, while there is much variation among the stocks included in terms of the role of the irregular arrival of new information in generating GARCH effects and the degree of persistence, all of the volatility processes are mean reverting.

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ID Code: 358
Item Type: Working Paper
Keywords: return volatility, trading volume, bid, ask spread, GARCH
ISSN: 1324-5910
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000)
Australian and New Zealand Standard Research Classification > MATHEMATICAL SCIENCES (010000) > PURE MATHEMATICS (010100) > Lie Groups Harmonic and Fourier Analysis (010106)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2001 (please consult author)
Deposited On: 30 Aug 2004
Last Modified: 05 Jan 2011 23:23

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