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The influence of intraday seasonality on volatility transmission pattern

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  • N. Alemany
  • V. Aragó
  • E. Salvador

Abstract

Using data on a five-minute interval basis, this article analyses the effects of intraday seasonality on volatility transmission between the spot and futures markets of the CAC40, DAX30 and FTSE100. Remarkable differences in the impulse response analysis and in the dynamic and directional measurement of volatility spillovers are encountered depending on whether the intraday periodic component is considered. Thus, the convenience of removing intraday seasonality seems to be critical to reduce the risk of spurious causality when employing high-frequency data in volatility transmission. Moreover, the impact of market microstructure noise seems negligible when using an optimal frequency of observations.

Suggested Citation

  • N. Alemany & V. Aragó & E. Salvador, 2019. "The influence of intraday seasonality on volatility transmission pattern," Quantitative Finance, Taylor & Francis Journals, vol. 19(7), pages 1179-1197, July.
    • Handle: RePEc:taf:quantf:v:19:y:2019:i:7:p:1179-1197
    DOI: 10.1080/14697688.2018.1563304
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    Cited by:

    1. Alemany, Nuria & Aragó, Vicent & Salvador, Enrique, 2020. "The distribution of index futures realised volatility under seasonality and microstructure noise," Economic Modelling, Elsevier, vol. 93(C), pages 398-414.

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