While many studies find that the tail distribution of high frequency stock returns follow a power law, there are only a few explanations for this finding. This study presents evidence that time-varying volatility can account for the power law property of high frequency stock returns. The power...

This study examines whether a conditional normal model with a nonparametric volatility distribution can account for the power law property of high frequency stock returns. The power law coefficients from the model are estimated using simulation methods applied to the empirical distribution for...