@article{c621d026ce4d4a0fbf1a84831062cf7b,
title = "High-Frequency Volatility Modelling: A Markov-Switching Autoregressive Conditional Intensity Model",
abstract = "We develop a Markov-Switching Autoregressive Conditional Intensity (MS-ACI) model with time-varying transitional probability, and show that it can be reliably estimated via the Stochastic Approximation Expectation-Maximization algorithm. Applying our model to high-frequency transaction data, we detect two distinct regimes in the intraday volatility process: a dominant volatility regime that is observable throughout the trading day representing the risk-transferring trading activity of investors, and a minor volatility regime that concentrates around market liquidity shocks which mainly capture impacts of firm-specic news arrivals. We propose a novel daily volatility decomposition based on the two detected volatility regimes.",
author = "Yifan Li and Ingmar Nolte and Sandra Nolte",
note = "Funding Information: We are grateful to two anonymous referees and the editor for their invaluable comments, which greatly improved the quality of the paper. We would like to acknowledge Sebastian Bayer, Winfried Pohlmeier and the Department of Economics, University of Konstanz for providing us with computational resources for the simulation. We are grateful to all participants at the 2nd and 3rd Konstanz-Lancaster Workshop for Financial Econometrics, the 1st Lancaster-Warwick Finance Workshop, the Financial Econometrics and Empirical Asset Pricing Conference at Lancaster University, the Vienna-Copenhagen Conference on Financial Econometrics and the 4th IAAE annual conference for their helpful discussions. We would like to thank Torben Andersen, Luc Bauwens, Asger Lunde, Peter Hansen, Nikolaus Hautsch and Olan Henry for their insightful suggestions and comments. Support from the ESRC-FWF grant {\textquoteleft}Bilateral Austria: Order Book Foundations of Price Risks and Liquidity: An Integrated Equity and Derivatives Markets Perspective{\textquoteright} (ES/N014588/1) is gratefully acknowledged. The usual disclaimer applies. Funding Information: We are grateful to two anonymous referees and the editor for their invaluable comments, which greatly improved the quality of the paper. We would like to acknowledge Sebastian Bayer, Winfried Pohlmeier and the Department of Economics, University of Konstanz for providing us with computational resources for the simulation. We are grateful to all participants at the 2nd and 3rd Konstanz-Lancaster Workshop for Financial Econometrics, the 1st Lancaster-Warwick Finance Workshop, the Financial Econometrics and Empirical Asset Pricing Conference at Lancaster University, the Vienna-Copenhagen Conference on Financial Econometrics and the 4th IAAE annual conference for their helpful discussions. We would like to thank Torben Andersen, Luc Bauwens, Asger Lunde, Peter Hansen, Nikolaus Hautsch and Olan Henry for their insightful suggestions and comments. Support from the ESRC-FWF grant ?Bilateral Austria: Order Book Foundations of Price Risks and Liquidity: An Integrated Equity and Derivatives Markets Perspective? (ES/N014588/1) is gratefully acknowledged. The usual disclaimer applies. Publisher Copyright: {\textcopyright} 2021 Copyright: Copyright 2021 Elsevier B.V., All rights reserved.",
year = "2021",
month = jan,
day = "28",
doi = "10.1016/j.jedc.2021.104077",
language = "English",
volume = "124",
journal = "Journal of Economic Dynamics and Control",
issn = "0165-1889",
publisher = "Elsevier BV",
}