The distribution of realised volatility: Evidence of normality and long memory in UK bond futures

Author： McMillan David G Speight Alan E H

ISSN： 1357-0927

Source： Derivatives Use, Trading Regulation, Vol.12, Iss.3, 2006-11, pp. : 200-208

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Abstract

Daily `realised' volatility for two UK bond futures is obtained from high frequency, five-minute, returns data. In contrast to previous results using daily data, which have reported that daily returns volatility and daily standardised returns exhibit conditional non-normality, we find that the `realised' logarithmic standard deviation and returns standardised by `realised' volatility are approximately normal. These results support the mixture-of-distributions hypothesis that daily returns are characterised by a normal-lognormal mixture. Finally, realised volatility exhibits highly persistent temporal dependence that can be characterised by a long memory process.Derivatives Use, Trading & Regulation (2006) 12, 200-208. doi:10.1057/palgrave.dutr.1850040