HAR-RV with Sector Variance

HAR-RV with Sector Variance

Sharon Lee

April 1, 2009

HAR-RV Model

• HAR-RV makes use of average realized variance over daily, weekly, and monthly periods.

• h=1 corresponds to daily periods, h=5 corresponds to weekly periods, h=22 corresponds to monthly periods

• These time horizons correspond to day-ahead, 5-day ahead, and month-ahead predictions of average realized variance.

Sectors

• Consumer Goods• Healthcare• Financial• Technology• Basic Materials• Industrials• Utilities• Conglomerates• Services

– Stocks with less than 2000 observations were removed

HAR-RV Models

• 1) Single stock on stock’s regressors

• 2) Single stock on stock’s regressors and its sector’s regressors

• 3) Single stock on stock’s regressors, sector’s regressors, and market’s regressors

Consumer Goods Sector

AVP AVON PRODUCTS INC

CL COLGATE PALMOLIVE

CPB CAMPBELL SOUP CO

F FORD MOTOR CO

HNZ HEINZ H J CO

IP INTL PAPER *not in downloads

KFT KRAFT FOODS INC

KO COCA COLA CO THE

MO ALTRIA GROUP INC

PEP PEPSICO INC

PG PROCTER GAMBLE CO

PM PHILIP MORRIS INTL *less than 2000 observations

SLE SARA LEE CP

XRX XEROX CP

Day Sector Week Sector Month Sector

PG (Consumer) 0.3184 0.3606 13% 0.4569 0.5870 28% 0.4858 0.5729 18%

Consumer F pf

Day 24.81991 0

Week 161.2798 0

Month 152.7373 0

Day, Sect +MktWk, Sect +Mkt Mo, Sect +Mkt

PG (Consumer) 13% 25% 28% -10% 18% -3%

Consumer Goods Sector

Model Fits

HealthcareABT ABBOTT LABORATORIES

AMGN Amgen Inc.

BAX BAXTER INTL INC

BMY BRISTOL MYERS SQIBB

CI CIGNA CP *not in downloads

COV COVIDIEN LTD *less than 2000 observations

JNJ JOHNSON AND JOHNS DC

MDT MEDTRONIC INC

MRK MERCK CO INC

PFE PFIZER INC

UNH UNITEDHEALTH GROUP

WYE WYETH *less than 2000 observations

Healthcare


JNJ (Healthcare) 0.3807 0.5284 39%0.510

0 0.6482 27%0.470

6 0.5475 16%


JNJ (Healthcare) 39% -14% 27% -18% 16% 0%

Health Care

Day 1046.898 0

Week 945.8228 0

Month 600.1527 0

Model Fits

FinancialAIG AMER INTL GROUP INC *not in downloads

ALL ALLSTATE CP

AXP AMER EXPRESS INC

BAC BK OF AMERICA CP

BK BANK OF NY MELLON CP

C CITIGROUP INC

COF CAPITAL ONE FINANCIA

GS GOLDMAN SACHS GRP

HIG HARTFORD FIN SVC *not in downloads

JPM JP MORGAN CHASE CO

MS MORGAN STANLEY *less than 2000 observations

NYX NYSE EURONEXT *less than 2000 observations

RF REGIONS FINANCIAL CP *less than 2000 observations

USB US BANCORP

WB WACHOVIA CP *not in downloads

Financial


JPM (Financial) 0.4595 0.5092 11%0.470

4 0.5325 13%0.503

9 0.5160 2%


JPM (Financial) 11% -10% 13% -1% 2% 7%

Financial

Day 2960.375 0

Week 3000.406 0

Month 2809.872 0

Model Fits

TechnologyCSCO Cisco Systems, Inc. Technology

DELL Dell Inc. Technology

EMC E M C CP Technology

GOOG Google Inc. Technology *less than 2000

HPQ HEWLETT PACKARD CO Technology

IBM INTL BUSINESS MACH Technology

INTC Intel Corporation Technology

MSFT Microsoft Corporation Technology

ORCL Oracle Corporation Technology

QCOM QUALCOMM Incorporated Technology

S SPRINT NXTEL CP Technology *less than 2000

T AT&T INC. Technology

TXN TEXAS INSTRUMENTS Technology

TYC TYCO INTL LTD NEW Technology

VZ VERIZON COMMUN Technology

Technology


ORCL (Technology) 0.3184 0.4529 42%0.456

9 0.5287 16%0.485

8 0.5706 17%


ORCL (Technology) 42% 7% 16% -14% 17% -1%

Technology

Day 160.5351 0

Week 159.7751 0

Month 207.6017 0

Model Fits

Basic Materials

AA ALCOA INC Basic Materials

BHI BAKER HUGHES INTL Basic Materials

COP CONOCOPHILLIPS Basic Materials

CVX CHEVRON CORP Basic Materials

DD DU PONT E I DE NEM Basic Materials

DOW DOW CHEMICAL Basic Materials

EP EL PASO CORPORATION Basic Materials

HAL HALLIBURTON CO Basic Materials

NOV NATL OILWELL VARCO Basic Materials

OXY OCCIDENTAL PET Basic Materials

SLB SCHLUMBERGER LTD Basic Materials

WMB WILLIAMS COS Basic Materials

XOM EXXON MOBIL CP Basic Materials

Basic Materials


AA (Basic Materials) 0.4967 0.5587 12%0.595

2 0.6735 13%0.525

4 0.5392 3%


AA (Basic Materials) 12% -13% 13% -20% 3% 2%

Basic Materials

Day 8744.193 0

Week 8943.996 0

Month 6670.166 0

Model Fits

Conglomerates

GE GEN ELECTRIC CO Conglomerates

MMM 3M COMPANY Conglomerates

UTX UNITED TECH Conglomerates

Conglomerates


MMM (Conglomerates) 0.5341 0.5504 3%0.652

6 0.6723 3%0.563

3 0.6004 7%


MMM (Conglomerates) 3% -17% 3% -21% 7% -6%

Conglomerates

Day 36.24122 0

Week 59.70226 0

Month 91.45653 0

Model Fits

Industrial

BA BOEING CO Industrial

CAT CATERPILLAR INC Industrial

GD GEN DYNAMICS CP Industrial

HON HONEYWELL INTL INC Industrial

RTN RAYTHEON CO (NEW) Industrial *less than 2000 observations

WY WEYERHAEUSER CO Industrial

Industrial


HON (Industrials) 0.3808 0.4452 17%0.513

7 0.5599 9%0.449

5 0.4874 8%


HON (Industrials) 17% 0% 9% 0% 8% 0%

Industrials

Day 62.75272 0

Week 103.2008 0

Month 73.26694 0

Model Fits

ServicesAMZN Amazon.com Services

BNI BURLINGTN N SANTE FE Services

CBS CBS CORP CL B Services *not found

CMCSA Comcast Corporation Services

CVS CVS CAREMARK CP Services

DIS WALT DISNEY-DISNEY C Services

FDX FEDEX CORP Services

HD HOME DEPOT INC Services

MA MASTERCARD INC Services *less than 2000 observations

MCD MCDONALDS CP Services

NSC NORFOLK SO CP Services

TGT TARGET CP Services

TWX TIME WARNER INC Services *less than 2000 observations

UPS UNITED PARCEL SVC Services

WMT WAL MART STORES Services

Services


TGT (Services) 0.5655 0.5654 0%0.670

2 0.6711 0%0.608

2 0.6132 1%


TGT (Services) 0% -20% 0% -21% 1% -5%

Services

Day 0.852992 0.999

Week 2.965395 2.74E-138

Month 10.57629 0

Model Fits

Utilities

AEP AMER ELECTRIC POW CO Utilities

AES AES CORPORATION Utilities *not found

ETR ENTERGY CP Utilities

EXC EXELON CORPORATION Utilities

SO SOUTHERN CO Utilities

Model Fits

Utilities


EXC (Utilities) 0.5015 0.5011 0% 0.628 0.6284 0%0.529

3 0.5336 1%


EXC (Utilities) 0% -10% 0% -17% 1% 2%

Utilities

Day 0.386227 1

Week 1.678704 1.84E-31

Month 7.223725 0

Model Fits

Adjusted R-squared Comparison


PG (Consumer) 0.3184 0.3606 13% 0.4569 0.5870 28% 0.4858 0.5729 18%

JNJ (Healthcare) 0.3807 0.5284 39% 0.5100 0.6482 27% 0.4706 0.5475 16%

JPM (Financial) 0.4595 0.5092 11% 0.4704 0.5325 13% 0.5039 0.5160 2%

ORCL (Technology) 0.3184 0.4529 42% 0.4569 0.5287 16% 0.4858 0.5706 17%

AA (Basic Materials) 0.4967 0.5587 12% 0.5952 0.6735 13% 0.5254 0.5392 3%

MMM (Conglomerates) 0.5341 0.5504 3% 0.6526 0.6723 3% 0.5633 0.6004 7%

HON (Industrials) 0.3808 0.4452 17% 0.5137 0.5599 9% 0.4495 0.4874 8%

TGT (Services) 0.5655 0.5654 0% 0.6702 0.6711 0% 0.6082 0.6132 1%

EXC (Utilities) 0.5015 0.5011 0% 0.628 0.6284 0% 0.5293 0.5336 1%

F-Tests

Consumer F pf

Day 24.81991 0

Week 161.2798 0

Month 152.7373 0

Basic Materials

Day 8744.193 0

Week 8943.996 0

Month 6670.166 0

Conglomerates

Day 36.24122 0

Week 59.70226 0

Month 91.45653 0

Financial

Day 2960.375 0

Week 3000.406 0

Month 2809.872 0

Industrials

Day 62.75272 0

Week 103.2008 0

Month 73.26694 0

Services

Day 0.852992 0.999

Week 2.965395 2.74E-138

Month 10.57629 0

Utilities

Day 0.386227 1

Week 1.678704 1.84E-31

Month 7.223725 0

Health Care

Day 1046.898 0

Week 945.8228 0

Month 600.1527 0

Technology

Day 160.5351 0

Week 159.7751 0

Month 207.6017 0

Market Regressors Added

Day, Sect +Mkt Wk, Sect +Mkt Mo, Sect +Mkt

PG (Consumer) 13% 25% 28% -10% 18% -3%

JNJ (Healthcare) 39% -14% 27% -18% 16% 0%

JPM (Financial) 11% -10% 13% -1% 2% 7%

ORCL (Technology) 42% 7% 16% -14% 17% -1%

AA (Basic Materials) 12% -13% 13% -20% 3% 2%

MMM (Conglomerates) 3% -17% 3% -21% 7% -6%

HON (Industrials) 17% 0% 9% 0% 8% 0%

TGT (Services) 0% -20% 0% -21% 1% -5%

EXC (Utilities) 0% -10% 0% -17% 1% 2%

next

• Explanations for market variables

• R-squared patterns among sectors

• Incorporate risk factors

• Further analysis

Documents

HAR-RV with Sector Variance