Interday and intraday volatility

Additional evidence from the Shanghai stock exchange

Gary Gang Tian*, Mingyuan Guo

*Corresponding author for this work

Research output: Contribution to journalArticle

34 Citations (Scopus)

Abstract

After examining both the interday and intraday return volatility of the Shanghai Composite Stock Index, it was found that the open-to-open return variance is consistently greater than the close-to-close variance. Examining the volatility of interday returns and variance ratio tests with five-minute intervals reveals an L-shaped pattern, or more precisely, two L-shaped patterns, starting with a small hump during both the morning and the afternoon sessions, with the morning session having a much higher interday volatility than the afternoon session. This L-shaped interday volatility is supported by the similarly shaped intraday volatility pattern. This result suggests that the high volatility of intraday returns for the market open is not entirely due to the trading mechanisms (call auction in the market opening) but also due to both the accumulated overnight information and the trading halt effect. The five-minute breaks after the auction and blind auction procedures are the two major driving forces which exaggerate the high intraday volatility observed at the market open.

Original languageEnglish
Pages (from-to)287-306
Number of pages20
JournalReview of Quantitative Finance and Accounting
Volume28
Issue number3
DOIs
Publication statusPublished - Apr 2007
Externally publishedYes

Keywords

  • Interday and intraday volatility
  • Order driven market
  • Shanghai stock exchange

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