Volatility and Price Discovery in Stock Markets

Using return series with various differencing intervals that are as short as half-hour and as long as two weeks, I investigate the short-term volatility accentuation in five equity markets: the Nasdaq Stock Market and the New York Stock Exchange in the US, and the London Stock Exchange, Deutsche Boerse and Euronext Paris in Europe. Results confirm an intra-day reverse J-shaped pattern of half-hour volatility in these markets. In addition, I find evidence of an intra-week pattern in volatility with higher volatility on Monday opening periods and Friday closing periods. The evidence also suggests an accentuation of volatility during longer periods, such as 24-hour intervals. This accentuation appears to subside when I extend the differencing interval to longer periods such as one-week or two-week returns. Findings indicate price discovery errors especially at shorter differencing intervals.

Author: Deniz Ozenbas

Publisher: VDM Verlag

Publication Date: Apr 24, 2009

Number of Pages: 132 pages

Binding: Paperback or Softback

ISBN-10: 3639146220

ISBN-13: 9783639146226