Persistence of volatility in futures markets

Chen, Z., Daigler, R. T. and Parhizgari, A. M. (2006) Persistence of volatility in futures markets. Journal of Futures Markets, 26 (6). pp. 571-594. ISSN 1096-9934 doi: 10.1002/fut.20210

Abstract/Summary

This article examines the characteristics of key measures of volatility for different types of futures contracts to provide a better foundation for modeling volatility behavior and derivative values. Particular attention is focused on analyzing how different measures of volatility affect volatility persistence relationships. Intraday realized measures of volatility are found to be more persistent than daily measures, the type of GARCH procedure used for conditional volatility analysis is critical, and realized volatility persistence is not coherent with conditional volatility persistence. Specifically, although there is a good fit between the realized and conditional volatilities, no coherence exists between their degrees of persistence, a counterintuitive finding that shows realized and conditional volatility measures are not a substitute for one another