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Ultra high frequency volatility estimation with dependent microstructure noise

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  • Aït-Sahalia, Yacine
  • Mykland, Per A.
  • Zhang, Lan

Abstract

We analyze the impact of time series dependence in market microstructure noise on the properties of estimators of the integrated volatility of an asset price based on data sampled at frequencies high enough for that noise to be a dominant consideration. We show that combining two time scales for that purpose will work even when the noise exhibits time series dependence, analyze in that context a refinement of this approach is based on multiple time scales, and compare empirically our different estimators to the standard realized volatility.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 160 (2011)
Issue (Month): 1 (January)
Pages: 160-175

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Handle: RePEc:eee:econom:v:160:y:2011:i:1:p:160-175

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Web page: http://www.elsevier.com/locate/jeconom

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Keywords: Market microstructure Serial dependence High frequency data Realized volatility Subsampling Two scales realized volatility Multiple scales realized volatility;

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References

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  19. Vetter, Mathias & Podolskij, Mark, 2006. "Estimation of Volatility Functionals in the Simultaneous Presence of Microstructure Noise and Jumps," Technical Reports 2006,51, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
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