[SFdS] Information du groupe Risques AEF
WG Risk - 28 May 2024 - Prof. Giuseppe Buccheri

Dear All,

We have the pleasure thanks to the support of the ESSEC IDS dpt, Institut des Actuaires, Fondation des Sciences de la Modélisation (CY - Labex MME-DII), the group Risques AEF (SFdS), to invite you to the seminar by:

Prof. Giuseppe Buccheri
Department of Economics, University of Verona, Italy

Date: Tuesday, 28 May 2024, at 12:30pm (Paris) and 6:30pm (Singapore)

Dual format: ESSEC Paris La Défense (CNIT), Room TBA
and via Zoom, please click here

« Semiparametric Estimation of Volatility in the Presence of Intraday Drift Dynamics »

In the conventional semimartingale representation of the log-price of a financial security, the volatility of daily log-returns is consistently estimated by their ex-post quadratic variation. A crucial assumption underlying this result is that the drift dynamics are negligible or pre-determined given past information. Recent empirical evidence of intraday unanticipated variations of mean returns calls into doubt the validity of this assumption. We propose a semiparametric estimator of the daily return volatility incorporating the effect of stochastic intraday dynamics of the drift process. This framework allows us to test for the presence of drift dynamics in the data and to assess their impact on the daily return volatility. Our empirical analysis shows three main results: (i) there exists compelling evidence of intraday drift dynamics across various asset classes; (ii) when the drift moves significantly, our measure of volatility provides a better description of the return distribution; (iii) the component of the return variance associated with drift dynamics is non-negligible and possesses predictive power.

Kind regards,
Jeremy Heng, Olga Klopp, Roberto Reno, and Marie Kratz
and Riada Djebbar (Singapore Actuarial Society - ERM)

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