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Intraday Volatility Patterns in the Taiwan Stock Market and the Impact on Volatility Forecasting
Author(s) -
Wang YawHuei,
Wang YunYi
Publication year - 2010
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/j.2041-6156.2009.00004.x
Subject(s) - volatility (finance) , econometrics , stock exchange , autoregressive model , heteroscedasticity , stock market index , stock market , stock (firearms) , economics , financial economics , finance , geography , context (archaeology) , archaeology
Given the growing importance of the Taiwan stock market, the present study sets out to provide a comprehensive investigation of the intraday time series of the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX). We begin by exploring the intraday volatility patterns and then go on to examine their impact on intraday volatility forecasting. We find that the volatility of the TAIEX returns exhibits an L‐shaped intraday periodic pattern, which is distinct across each day of the week. Our empirical results indicate that taking the intraday periodic pattern into account in a generalized autoregressive conditional heteroskedasticity model can substantially improve the precision of intraday volatility forecasting.