Economics 201FS: Realized Volatility, Bipower Variance, Alternative Volatilit y Measures

Economics 201FS: Realized Volatility, Bipower Variance,

Alternative Volatility Measures

Grace Shuting WeiSpring 2011

Main Points• Price Series• Geometrics Returns• Realized Variance• Bipower Variance• Relative Contribution of jumps• Volatility Signature Plot

Data• GOOG (Google)

– Aug 20 2004 – Dec 31 2010• WMT (Wal-Mart)

– Jan 2 2008 – Dec 31 2010

GOOG: Price Series

GOOG: Geometric Returns

WMT: Price Series

WMT: Geometric Returns

GOOG: Realized Variance

GOOG: Bipower Variation

GOOG: Relative Contribution of Jumps

WMT: Realized Variance

WMT: Bipower Variation

WMT: Relative Contribution of Jumps

GOOG: Volatility Signature Plot (RV)

GOOG: Volatility Signature Plot (BV)

WMT: Volatility Signature Plot (RV)

WMT: Volatility Signature Plot (BV)

Other Volatility Measures

Alternative Measures• Sub-Sampling (Zhang, AïtSahalia and Mykland, 2005)• Pre-Averaging (Podolskij and Vetter, 2009)• MedVar (Anderson, Dobrev and Schaumburg, 2010)

• MinVar (Anderson, Dobrev and Schaumburg, 2010)

• Threshold Variation (Mancini, 2009)