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Economics 201FS: Realized Covariance, Realized Betas, “ Bipower Betas”

Economics 201FS: Realized Covariance, Realized Betas, “ Bipower Betas”. Grace Shuting Wei Spring 2011 16 February 2011. Main Points. Goals Stock Choices Basic Properties of Stocks Realized Covariance Realized Correlation Realized Betas Bipower Volatility Measures Extensions.

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Economics 201FS: Realized Covariance, Realized Betas, “ Bipower Betas”

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  1. Economics 201FS: Realized Covariance, Realized Betas, “Bipower Betas” Grace Shuting Wei Spring 2011 16 February 2011

  2. Main Points • Goals • Stock Choices • Basic Properties of Stocks • Realized Covariance • Realized Correlation • Realized Betas • Bipower Volatility Measures • Extensions

  3. 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

  4. FDX: Price & Returns

  5. FDX: Realized, Bipower Volatility

  6. UPS: Price & Returns

  7. UPS: Realized, Bipower Volatility

  8. SPFU: Price & Returns

  9. SPFU: Realized, Bipower Volatility

  10. Realized Covariance, Correlation, Beta • Realized Covariance • Realized Correlation • Realized Beta

  11. FDX & Market: Realized Covariance, Corr

  12. UPS & Market: Realized Covariance, Corr

  13. FDX & UPS: Realized Covariance, Corr

  14. Bipower Volatility, Beta • Bipower Covariance • Backed out from portfolio approach • Bipower Beta • =

  15. FDX: Bipower Beta

  16. FDX: Scatter of Betas

  17. UPS: Bipower Beta

  18. UPS: Scatter of Betas

  19. Extensions • Comparison of “bipower” beta to βc • Use of simulated data • “Right” answer • Effect of microstructure noise on betas

  20. Realized Covariance Signature Plots

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