A large package of information is being reflected in stock prices during a short period after opening. Moreover, the start-of-the-day (morning) volatility has a strong impact on the price variability during all the day. In this connection,  the question is whether the morning realized variance calculated as the sum of morning intraday returns can be useful in forecasting the daily realized variance (end-of-the-day volatility).

In the paper, we apply three different methods of forecasting the daily realized variance for stocks quoted on the Warsaw Stock Exchange, including the one based on calculation of the forecast as a linear function of the morning realized variance with time varying coefficients estimated by using the diagonal BEKK model. Our findings show that the morning realized variance provides valuable information that can be used in forecasting the daily realized variance.

1. FULLTEXT: Forecasting the end-of-the-day realized variance, Microsoft Office Document, 3MB

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