Excessive data needed for volatility{TTR} calculation?

Hi again,

I've been trying to figure out the problem and I believe there is a
problem with the vectorization in volatility, which results in the
volatility calculations for the close to close method being
inaccurate. ?I believe the issue is with this part of line 14.

runSum((r - rBar)^2, n - 1)

The first 9 r all have to be differenced against the same rBar, not a
running sum of rBars. ?I believe a better way to accomplish this would
be:

s <- sqrt(N) * runSD(r, (n -1))

volatility

function (OHLC, n = 10, calc = "close", N = 260, ...)
{
? ?OHLC <- try.xts(OHLC, error = as.matrix)
? ?calc <- match.arg(calc, c("close", "garman.klass", "parkinson",
? ? ? ?"rogers.satchell", "gk.yz", "yang.zhang"))
? ?if (calc == "close") {
? ? ? ?if (NCOL(OHLC) == 1) {
? ? ? ? ? ?r <- ROC(OHLC[, 1], 1, ...)
? ? ? ?}
? ? ? ?else {
? ? ? ? ? ?r <- ROC(OHLC[, 4], 1, ...)
? ? ? ?}
? ? ? ?rBar <- runSum(r, n - 1)/(n - 1)
? ? ? ?s <- sqrt(N/(n - 2) * runSum((r - rBar)^2, n - 1)) ? ? ? # line 14
? ?}

Please let me know if this makes sense to anyone else, or if I'm
mistaken. ?Thanks.

James

On Fri, May 27, 2011 at 6:52 PM, J Toll <jctoll at gmail.com> wrote:

Hi,

I have been using the volatility function from the TTR package and I
noticed something that I thought was a bit unusual. I expected that I
should be able to calculate the default 10-day volatility using the
close estimator starting with 10 or maybe 11 days of data. ?That's not
what I found. ?It appears that 18 days of data is necessary to
calculate a 10-day volatility. ?For example:

getSymbols("SPY")

[1] "SPY"

volatility(tail(SPY, 10), n = 10, calc = "close", N = 260)

Error in `[.xts`(x, beg:(n + beg - 1)) : subscript out of bounds

volatility(tail(SPY, 11), n = 10, calc = "close", N = 260)

Error in `[.xts`(x, beg:(n + beg - 1)) : subscript out of bounds

volatility(tail(SPY, 18), n = 10, calc = "close", N = 260)

? ? ? ? ? ? ? ? [,1]
2011-05-03 ? ? ? ? NA
2011-05-04 ? ? ? ? NA
2011-05-05 ? ? ? ? NA
- edited for brevity -
2011-05-23 ? ? ? ? NA
2011-05-24 ? ? ? ? NA
2011-05-25 ? ? ? ? NA
2011-05-26 0.09481466

Stranger still (at least to me), it appears that 38 days worth of data
is necessary to start calculating a 20-day volatility.

volatility(tail(SPY, 37), n = 20, calc = "close", N = 260)

Error in `[.xts`(x, beg:(n + beg - 1)) : subscript out of bounds

volatility(tail(SPY, 38), n = 20, calc = "close", N = 260)

? ? ? ? ? ? ? ?[,1]
2011-04-04 ? ? ? ?NA
2011-04-05 ? ? ? ?NA
2011-04-06 ? ? ? ?NA
?- edited for brevity -
2011-05-23 ? ? ? ?NA
2011-05-24 ? ? ? ?NA
2011-05-25 ? ? ? ?NA
2011-05-26 0.1088309

58 days of data is necessary for a 30-day volatility calculation.
From looking at the code for the volatility function, I'm not seeing
why so much additional data is needed to calculate the volatility.
Does anybody have an idea of why so much additional data is necessary?
?Thanks.

James

R version 2.13.0 (2011-04-13)
Copyright (C) 2011 The R Foundation for Statistical Computing
ISBN 3-900051-07-0
Platform: x86_64-apple-darwin9.8.0/x86_64 (64-bit)