4. Implications for volatility modeling and high frequency return aggregation

Section 3 demonstrates that the distinct intraday periodicity has a strong impact

on the autocorrelation patterns of the 5-minute returns. The question therefore

arises whether more formal time series modeling of return volatility is similarly

affected by the presence of periodic features, and if so, whether some observation

intervals are preferable relative to others for the purpose of drawing inference

concerning the dynamic features of interest. In order to address these issues this

section presents an extensive analysis of the properties of the return series

obtained at a range of different intradaily and interdaily frequencies.

Section 3 demonstrates that the distinct intraday periodicity has a strong impact

on the autocorrelation patterns of the 5-minute returns. The question therefore

arises whether more formal time series modeling of return volatility is similarly

affected by the presence of periodic features, and if so, whether some observation

intervals are preferable relative to others for the purpose of drawing inference

concerning the dynamic features of interest. In order to address these issues this

section presents an extensive analysis of the properties of the return series

obtained at a range of different intradaily and interdaily frequencies.