Survey_ABD_2003

Abstract

We present the results for three distinct markets: the DM/$ foreign exchange market, the aggregate U.S. stock market as summarized by the S&P500 index, and the fixed income market as represented by the 30-year U.S. Treasury bond yield. The DM/$ volatilitiescover the period from December 1986 through June 1999, for a total of 3,045 daily observations. The underlying highfrequency spot quotations were kindly provided by Olsen & Associates in Zurich, Switzerland. This same series has been previously analyzed in the series of papers by ABDL (2001, 2003). The S&P500 volatility measurements are based on tick-by-tick transactions prices from the Chicago Mercantile Exchange (CME) and cover the period from January 1990 through December 2002, for a total of 3,262 daily observations. The T-bond volatilities are similarly constructed from tick-by-tick transactions prices for the 30 year U.S. Treasury Bond futures contract traded on the Chicago Board of Trade (CBOT), and cover the identical January 1990 through December 2002 period. A more detailed description of the S&P and T-bond data is available in Andersen, Bollerslev, Diebold and Vega (2003b), where the same highfrequency data are analyzed from a very different perspective. All of the volatility measures are based on linearly interpolated logarithmic five-minute returns, as in Müller et al. (1990) and Dacorogna et al. (1993). For the foreign exchange market this results in a total of 1/) = 288 high-frequency return observations per day, while the two futures contracts are actively traded for 1/) = 97 five-minute intervals per day. For notational simplicity, we omit the explicit reference to ) in the following, referring to the five-minute realized volatilities and jumps defined by equations (3) and (8) as RVt and Jt ,respectively.