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Abstract:
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In this paper using data from 1995-2005 on 5-minute intraday returns, we construct a model free estimate of the daily realized volatility for the German DAX index. We compute the unconditional return and volatility distribution of the DAX index by a nonparametric kernel estimation method. Our results indicate that the unconditional volatility distribution of the DAX returns are leptokurtic and highly skewed to the right. The logarithmic standard deviations seem to be approximately Gaussian. Further more, the distributions of the returns scaled by the realized standard deviations are Gaussian. Our results are inline with Andersen, Bollerslev, Diebold Evens (1999) for individual DJIA equity return volatility and Andersen, Bollerslev and Cai (2000) for Japanese index, Nikkei 225.
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