A simple two-component model for the distribution of intraday returns
Publication type
Journal articlePublication Year
2012Journal
The European Journal of FinancePublication Volume
18Publication Issue
9Publication Begin page
775Publication End page
797
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We model the conditional distribution of high-frequency financial returns by means of a two-component quantile regression model. Using three years of 30 minute returns, we show that the conditional distribution depends on past returns and on the time of the day. Two practical applications illustrate the usefulness of the model. First, we provide quantile-based measures of conditional volatility, asymmetry and kurtosis that do not depend on the existence of moments. We find seasonal patterns and time dependencies beyond volatility. Second, we estimate and forecast intraday Value at Risk. The two-component model is able to provide good-risk assessments and to outperform GARCH-based Value at Risk evaluations.Keyword
Accounting & FinanceKnowledge Domain/Industry
Accounting & Financeae974a485f413a2113503eed53cd6c53
10.1080/1351847X.2011.601649