Scandinavian Working Papers in Business Administration
Working Papers,
Örebro University, School of Business
No 2025:12: Fast and Slow Level Shifts in Intraday Stochastic Volatility
Igor F. B. Martins Martins (), Audronè Virbickaitè (), Hoang Nguyen () and Freitas Lopes Hedibert ()
Additional contact information
Igor F. B. Martins Martins: Örebro University School of Business, Postal: Örebro University, School of Business, SE - 701 82 ÖREBRO, Sweden
Audronè Virbickaitè: CUNEF University, Madrid, Spain, Postal: CUNEF University, Calle Almansa, 101, 28040 Madrid, Spain
Hoang Nguyen: Linköping University, Postal: Linköping University, SE-581 83 Linköping, Sweden
Freitas Lopes Hedibert: Insper Institute of Education and Research, Postal: Insper Institute of Education and Research, R. Quatá, 300 - Vila Olímpia, São Paulo , SP, 04546-042, Brasilien
Abstract: This paper proposes a mixed-frequency stochastic volatility model for intraday returns that captures fast and slow level shifts in the volatility level induced by news from both low-frequency variables and scheduled announcements. A MIDAS component describes slow-moving changes in volatility driven by daily variables, while an announcement component captures fast eventdriven volatility bursts. Using 5-minute crude oil futures returns, we show that accounting for both fast and slow level shifts significantly improves volatility forecasts at intraday and daily horizons. The superior forecasts also translate into higher Sharpe ratios using the volatilitymanaged portfolio strategy.
Keywords: Intraday volatility; high-frequency; announcements; MIDAS; oil; sparsity.
Language: English
37 pages, November 7, 2025
Full text files
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