High Volatile MarketsHAR-RV

Fed Funds Rate

Motivation

• Examine HAR-RV model differ in the financial sector data from 1997 compared to post July 2007 and post September 15 2008

Financial Sector Data• JPM (JP Morgan)• BK (new) (Bank of New York Mellon)• BAC (Bank of America)• AXP (American Express)• ALL (Allstate)Others Not Included Because of Data Differences

Financial Sector Data

• Equally Weighted • Modify data so that stock splits do not affect

the RV• Portfolio1: 4/10/1997 through 1/7/2009 (1

share of each stock)• Portfolio2: 4/10/1997 through 1/7/2009

(equally weighted)

HAR-RV

Data Points

From 1997 2900

Post July 2007 356

Post Sept 15 2008 76

HAR-RV: Full Data

Robust regression Number of obs 2895

F( 3, 2891) 98731.66

Prob > F 0

v1 Coef. Std. Err. t P>t [95% Conf. Interval]

v2 .3082 0.002 154.970 0.000 0.304 0.312

v3 .1525 0.001 122.480 0.000 0.150 0.155

v4 .0289 0.001 54.390 0.000 0.028 0.030

_cons .0001 0.000 11.090 0.000 0.000 0.000

HAR-RV

HAR-RV: Financial Crisis

Robust regression Number of obs 355

F( 3, 351) 1499.84

Prob > F 0

v1 Coef. Std. Err. t P>t [95% Conf. Interval]

v2 .4904 0.014 34.840 0.000 0.463 0.518

v3 .1024 0.009 11.600 0.000 0.085 0.120

v4 -.0017 0.004 -0.420 0.675 -0.010 0.006

_cons .0012 0.000 4.700 0.000 0.001 0.002

HAR-RV Prediction Finance

HAR-RV: Post Lehman

Robust regression Number of obs 75

F( 3, 71) 11.3

Prob > F 0

v1 Coef. Std. Err. t P>t [95% Conf. Interval]

v2 .3054 0.065 4.690 0.000 0.175 0.435

v3 .0212 0.039 0.540 0.591 -0.057 0.099

v4 .0039 0.031 0.120 0.901 -0.058 0.065

_cons .0120 0.006 1.980 0.052 0.000 0.024

HAR-RV with Fed Factor: Full Data

Robust regression Number of obs 2895F( 4, 2890) 74118.55Prob > F 0

v1 Coef. Std. Err. t P>t [95% Conf. Interval]

v2 .3079 0.002 154.440 0.000 0.304 0.312v3 .1528 0.001 122.570 0.000 0.150 0.155v4 .0289 0.001 54.400 0.000 0.028 0.030v5 .0001 0.0000719 1.14 0.256 -0.0000593 0.0002225_cons .0001 0.0000102 10.89 0 0.0000912 0.0001

HAR-RV with Fed

Robust regression Number of obs 355

F( 4, 350) 1121.1

Prob > F 0

v1 Coef. Std. Err. t P>t [95% Conf. Interval]

v2 .4932 0.014 34.500 0.000 0.465 0.521

v3 .1026 0.009 11.550 0.000 0.085 0.120

v4 -.0021 0.004 -0.490 0.622 -0.010 0.006

v5 -.0003 0.001 -0.270 0.785 -0.003 0.002

_cons .0012 0.000 4.670 0.000 0.001 0.002

HAR-RV with Fed: Post Lehman

Robust regression Number of obs 76

F( 4, 71) 13.57

Prob > F 0

v1 Coef. Std. Err. t P>t [95% Conf. Interval]

v2 .2931 0.053 5.490 0.000 0.187 0.400

v3 .0275 0.041 0.680 0.499 -0.053 0.108

v4 .0020 0.032 0.060 0.949 -0.062 0.066

v5 .0042 0.010 0.430 0.668 -0.015 0.024

_cons .0121 0.006 2.020 0.048 0.000 0.024

HAR-RV with Fed Direction Changes: Full Data Set

Robust regression Number of obs 2896

F( 5, 2890) 63084.36

Prob > F 0

v1 Coef. Std. Err. t P>t [95% Conf. Interval]

v2 .3079 0.002 153.830 0.000 0.304 0.312

v3 .1524 0.001 123.990 0.000 0.150 0.155

v4 .0290 0.0005305 54.67 0 0.0279631 0.0300435

v6 .0002 0.000099 2.25 0.024 0.0000287 0.0004169

v7 .00002 0.0001043 0.18 0.859 -0.0001859 0.000223

_cons .0001118 0.0000102 10.94 0 0.0000917 0.0001318

HAR-RV with Fed Direction: Financial Crisis

Robust regression Number of obs 355

F( 4, 350) 1121.1

Prob > F 0

v1 Coef. Std. Err. t P>t [95% Conf. Interval]

v2 .4932 0.014 34.500 0.000 0.465 0.521

v3 .1026 0.009 11.550 0.000 0.085 0.120

v4 -.0021 0.004 -0.490 0.622 -0.010 0.006

v6 -.0003 0.001 -0.270 0.785 -0.003 0.002

v7 (dropped)

_cons .0012347 0.000 4.670 0.000 0.001 0.002

HAR-RV with Fed Direction: Post Lehman

Robust regression Number of obs 76F( 4, 71) 13.57Prob > F 0

v1 Coef. Std. Err. t P>t [95% Conf. Interval]

v2 .2931 0.053 5.490 0.000 0.187 0.400v3 .0275 0.041 0.680 0.499 -0.053 0.108v4 .0020 0.032 0.060 0.949 -0.062 0.066v6 .0042 0.010 0.430 0.668 -0.015 0.024v7 (dropped)_cons .0121 0.006 2.020 0.048 0.000 0.024