This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Refined Inference on Long Memory in Realized Volatility

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Offer Lieberman
Peter Phillips

Additional information is available for the following registered author(s):

Abstract

There is an emerging consensus in empirical finance that realized volatility series typically display long range dependence with a memory parameter (d) around 0.4 (Andersen et al., 2001; Martens et al., 2004). The present article provides some illustrative analysis of how long memory may arise from the accumulative process underlying realized volatility. The article also uses results in Lieberman and Phillips (2004, 2005) to refine statistical inference about d by higher order theory. Standard asymptotic theory has an O(n-1/2) error rate for error rejection probabilities, and the theory used here refines the approximation to an error rate of o(n-1/2). The new formula is independent of unknown parameters, is simple to calculate and user-friendly. The method is applied to test whether the reported long memory parameter estimates of Andersen et al. (2001) and Martens et al. (2004) differ significantly from the lower boundary (d = 0.5) of nonstationary long memory, and generally confirms earlier findings.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/07474930701873374&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
File Format: text/html
File Function:
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Article provided by Taylor and Francis Journals in its journal Econometric Reviews.

Volume (Year): 27 (2008)
Issue (Month): 1-3 ()
Pages: 254-267
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:taf:emetrv:v:27:y:2008:i:1-3:p:254-267

Contact details of provider:
Web page: http://taylorandfrancis.metapress.com/link.asp?target=journal&id=107830

Order Information:
Web: http://www.tandf.co.uk/journals/subscription.html

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords: Edgeworth expansion; Long memory; Realized volatility;

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Andersen T. G & Bollerslev T. & Diebold F. X & Labys P., 2001. "The Distribution of Realized Exchange Rate Volatility," Journal of the American Statistical Association, American Statistical Association, vol. 96, pages 42-55, March. [Downloadable!] (restricted)
  2. Yacine Aït-Sahalia, 2005. "How Often to Sample a Continuous-Time Process in the Presence of Market Microstructure Noise," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 18(2), pages 351-416. [Downloadable!] (restricted)
    Other versions:
  3. Merton, Robert C., 1980. "On estimating the expected return on the market : An exploratory investigation," Journal of Financial Economics, Elsevier, vol. 8(4), pages 323-361, December. [Downloadable!] (restricted)
    Other versions:
  4. Andersen, Torben G & Bollerslev, Tim, 1997. " Heterogeneous Information Arrivals and Return Volatility Dynamics: Uncovering the Long-Run in High Frequency Returns," Journal of Finance, American Finance Association, vol. 52(3), pages 975-1005, July. [Downloadable!] (restricted)
    Other versions:
  5. Neil Shephard, 2005. "Stochastic Volatility," Economics Papers 2005-W17, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
  6. Lieberman, Offer & Phillips, Peter C.B., 2004. "Expansions For The Distribution Of The Maximum Likelihood Estimator Of The Fractional Difference Parameter," Econometric Theory, Cambridge University Press, vol. 20(03), pages 464-484, June. [Downloadable!]
  7. Pong, Shiuyan & Shackleton, Mark B. & Taylor, Stephen J. & Xu, Xinzhong, 2004. "Forecasting currency volatility: A comparison of implied volatilities and AR(FI)MA models," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2541-2563, October. [Downloadable!] (restricted)
  8. Federico Bandi & Benoit Perron, 2003. "Long memory and the relation between implied and realized volatility," Econometrics 0305004, EconWPA. [Downloadable!]
    Other versions:
  9. Lan Zhang & Per A. Mykland & Yacine Ait-Sahalia, 2003. "A Tale of Two Time Scales: Determining Integrated Volatility with Noisy High Frequency Data," NBER Working Papers 10111, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Offer Lieberman & Peter C.B. Phillips, 2004. "Expansions for Approximate Maximum Likelihood Estimators of the Fractional Difference Parameter," Cowles Foundation Discussion Papers 1474, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  11. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2003. "Modeling and Forecasting Realized Volatility," Econometrica, Econometric Society, vol. 71(2), pages 579-625, March. [Downloadable!] (restricted)
    Other versions:
  12. Martin Martens & Dick van Dijk & Michiel de Pooter, 2004. "Modeling and Forecasting S&P 500 Volatility: Long Memory, Structural Breaks and Nonlinearity," Tinbergen Institute Discussion Papers 04-067/4, Tinbergen Institute. [Downloadable!]
  13. Lan Zhang & Per A. Mykland & Yacine Ait-Sahalia, 2005. "Edgeworth Expansions for Realized Volatility and Related Estimators," NBER Technical Working Papers 0319, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Rohit Deo & Clifford Hurvich & Yi Lu, 2005. "Forecasting Realized Volatility Using a Long Memory Stochastic Volatility Model: Estimation, Prediction and Seasonal Adjustment," Econometrics 0501002, EconWPA. [Downloadable!]
    Other versions:
  15. K Abadir & W Distaso & L Giraitis, . "Local Whittle estimation, fully extended for nonstationarity," Discussion Papers 05/16, Department of Economics, University of York.
  16. Andersen, Torben G & Bollerslev, Tim, 1998. "Answering the Skeptics: Yes, Standard Volatility Models Do Provide Accurate Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 885-905, November.
  17. Peter C.B. Phillips, 1999. "Discrete Fourier Transforms of Fractional Processes," Cowles Foundation Discussion Papers 1243, Cowles Foundation, Yale University. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Offer Lieberman & Peter C.B. Phillips, 2006. "A Complete Asymptotic Series for the Autocovariance Function of a Long Memory Process," Cowles Foundation Discussion Papers 1586, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? IDEAS uses the data collected within the RePEc project, the largest online bibliographic database in Economics.

This page was last updated on 2009-11-14.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.