High Volatile Markets HAR-RV Fed Funds Rate

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