Financial The Distribution of Stock Return Volatility Institutions Center by Torben G. Andersen, Tim Bollerslev, Francis X. Diebold and Heiko Ebens 00-27 The Wharton Financial Institutions Center The Wharton Financial Institutions Center provides a multi-disciplinary research approach to the problems and opportunities facing the financial services industry in its search petitive excellence. The Center's research focuses on the issues related to managing risk at the firm level as well as ways to improve productivity and performance. The Center fosters the development of munity of faculty, visiting scholars and . candidates whose research plement and support the mission of the Center. The Center works closely with industry executives and practitioners to ensure that its research is informed by the operating realities petitive demands facing industry participants as they petitive excellence. Copies of the working papers summarized here are available from the Center. If you would like to learn more about the Center or e a member of our munity, please let us know of your interest. Anthony M. Santomero Director The Working Paper Series is made possible by a generous grant from the Alfred P. Sloan Foundation The Distribution of Stock Return Volatility* Torben G. Andersena, Tim Bollerslevb, Francis X. Dieboldc and Heiko Ebensd December 21, 1999 Abstract We exploit direct model-free measures of daily equity return volatility and correlation obtained from high-frequency intraday transaction prices on individual stocks in the Dow Jones Industrial Average over a five-year period to confirm, solidify and extend existing characterizations of stock return volatility and correlation We find that the unconditional distributions of the variances and covariances for all thirty stocks are leptokurtic and highly skewed to the right, while the logarithmic standard deviations and correlations all appear approximately Gaussian. Moreover, t
