How Crashes Develop: Intradaily Volatility and Crash Evolution
Event details
| Date | 02.06.2017 |
| Hour | 10:30 › 12:00 |
| Speaker | David BATES (Iowa University) |
| Location | |
| Category | Conferences - Seminars |
This paper explores whether affine models with volatility jumps estimated on intradaily S&P 500 futures data over 1983-2008 can capture major daily outliers such as the 1987 stock market crash. I find that intradaily jumps in futures prices are typically small, and that self-exciting but short-lived volatility spikes capture intradaily and daily returns better. Multifactor models of the evolution of diffusive variance and jump intensities improve fits substantially, including out-of-sample over 2009-16. The models capture reasonably well the conditional distributions of daily returns and of realized variance outliers, but underpredict realized variance inliers.
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