Post on 09-Jan-2016
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Economics 201FS: Realized Covariance, Realized Betas,
“Bipower Betas”
Grace Shuting WeiSpring 2011
16 February 2011
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Main Points• Goals• Stock Choices• Basic Properties of Stocks• Realized Covariance• Realized Correlation• Realized Betas• Bipower Volatility Measures• Extensions
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Data• UPS, FDX, SPFU
– Nov 11 1999 – Dec 30 2010– 2763 days– Aligned time series
• Data Outliers– Measurement error: UPS– Data of erroneous day removed
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FDX: Price & Returns
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FDX: Realized, Bipower Volatility
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UPS: Price & Returns
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UPS: Realized, Bipower Volatility
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SPFU: Price & Returns
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SPFU: Realized, Bipower Volatility
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Realized Covariance, Correlation, Beta• Realized Covariance
• Realized Correlation
• Realized Beta
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FDX & Market: Realized Covariance, Corr
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UPS & Market: Realized Covariance, Corr
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FDX & UPS: Realized Covariance, Corr
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Bipower Volatility, Beta• Bipower Covariance
– Backed out from portfolio approach• Bipower Beta
– =
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FDX: Bipower Beta
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FDX: Scatter of Betas
RealizedBeta
Bipower Beta
Mean 0.7140 0.7590
SD 0.3366 0.4022
Max 2.2849 3.2043
Min -0.7919 -1.0370
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UPS: Bipower Beta
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UPS: Scatter of Betas
RealizedBeta
Bipower Beta
Mean 0.5368 0.5736
SD 0.3116 0.3558
Max 1.6126 2.5496
Min -0.5104 -1.0697
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Extensions• Comparison of “bipower” beta to βc• Use of simulated data
– “Right” answer• Effect of microstructure noise on betas
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Realized Covariance Signature Plots