erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Analyzing the Intraday Volatility of ISE Returns

Burak Saltoğlu (Marmara University)
Serhat Zafer Tatlı (Marmara University)

Abstract

Modelling intraday stock return volatility has been a popular research topic in the financial econometrics literature. As can be seen from this literature, very little has been done on intraday volatility modelling in emerging markets. The main aim of this paper is to attempt to close this research gap by studying the intraday volatility pattern of ISE returns as an emerging markets. Two main questions will be addressed in this paper. First the relative success of parametric volatility models on the ISE intraday returns will be assessed. To this end, various ARCH type models (AARCH, EGARCH, TARCH etc) will be utilized. Each of these models will be used to judge the degree of success in modelling the intraday volatility dynamics in ISE. The second question which is aimed to be answered in this study is to test the existence of any periodic cycle in ISE. As is known in the literature the U-type and J-type volatility patterns (over time) are commonly seen in many of the developed markets financial return series. The data used in this study covers ISE-100 minute by minute closing price of ISE-100 composite index between 30/12/1997 and 06/03/2000 including 127,688 observations. To analyze the possible time aggregation properties of the volatility model other relatively lower frequencies (specifically 5 minutes returns and hourly series) will also be utilized in this study. Finally, throughout this study, the validity of previous studies performed by Andersen and Bollerslev (1997), Goodhart and O’Hara (1997) and Gagnon et al (1998) on the ISE return volatility will be assessed.

Economic Research Center
Middle East Technical University
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e-mail: metuerc@metu.edu.tr