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Analysis of Realized Volatility in Two Trading Sessions of the Japanese Stock Market

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  • Tetsuya Takaishi
  • Ting Ting Chen
  • Zeyu Zheng

Abstract

We analyze realized volatilities constructed using high-frequency stock data on the Tokyo Stock Exchange. In order to avoid non-trading hours issue in volatility calculations we define two realized volatilities calculated separately in the two trading sessions of the Tokyo Stock Exchange, i.e. morning and afternoon sessions. After calculating the realized volatilities at various sampling frequencies we evaluate the bias from the microstructure noise as a function of sampling frequency. Taking into account of the bias to realized volatility we examine returns standardized by realized volatilities and confirm that price returns on the Tokyo Stock Exchange are described approximately by Gaussian time series with time-varying volatility, i.e. consistent with a mixture of distributions hypothesis.

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  • Tetsuya Takaishi & Ting Ting Chen & Zeyu Zheng, 2013. "Analysis of Realized Volatility in Two Trading Sessions of the Japanese Stock Market," Papers 1304.6006, arXiv.org.
    • Handle: RePEc:arx:papers:1304.6006
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    References listed on IDEAS

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    1. Bouchaud,Jean-Philippe & Potters,Marc, 2003. "Theory of Financial Risk and Derivative Pricing," Cambridge Books, Cambridge University Press, number 9780521819169, September.
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