Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2025-06-26 
Number: 25-039/III
Author-Name: Daan Schoemaker
Author-Workplace-Name: Vrije Universiteit Amsterdam and Tinbergen Institute
Author-Name: André Lucas
Author-Workplace-Name: Vrije Universiteit Amsterdam and Tinbergen Institute
Author-Name: Anne Opschoor
Author-Workplace-Name: Vrije Universiteit Amsterdam and Tinbergen Institute
Title: Conditional Fat Tails and Scale Dynamics for Intraday Discrete Price Changes
Abstract: We investigate the conditional tail behaviour of asset price changes at high (10-second) frequencies using a new dynamic model for integer-valued tickdata. The model has fat tails, scale dynamics, and allows for possible over- or under-representation of zero price changes. The model can be easily estimated using standard maximum likelihood methods and accommodates both polynomially (fat) and geometrically declining tails. In an application to stock, cryptocurrency and foreign exchange markets during the COVID-19 crisis, we find that conditional fat-tailedness is empirically important for many assets, even at such high frequencies. The new model outperforms the thin-tailed (zero-initiated) dynamic benchmark Skellam model by a wide margin, both insample and out-of-sample.
Classification-JEL: C22, C46, C58
Keywords: high frequency tick data, polynomial tails, discrete data, Hurwitz zeta function, score-driven dynamics
File-URL: https://papers.tinbergen.nl/25039.pdf
File-Format: application/pdf
File-Size: 793.964 bytes
Handle: RePEc:tin:wpaper:20250039