Advanced Search
MyIDEAS: Login

Estimation of long memory in integrated variance

Contents:

Author Info

  • Eduardo Rossi

    ()
    (University of Pavia)

  • Paolo Santucci de Magistris

    ()
    (University of Padova and CREATES)

Abstract

A stylized fact is that realized variance has long memory. We show that, when the instantaneous volatility is driven by a fractional Brownian motion, the integrated variance is characterized by long-range dependence. As a consequence, the realized variance inherits this property when prices are observed continuously and without microstructure noise, and the spectral densities of integrated and realized variance coincide. However, prices are not observed continuously, so that the realized variance is affected by a measurement error. Discrete sampling and market microstructure noise induce a finite-sample bias in the fractionally integration semiparametric estimates. A Monte Carlo simulation analysis provides evidence of such a bias for common sampling frequencies.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. 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: ftp://ftp.econ.au.dk/creates/rp/11/rp11_11.pdf
Download Restriction: no

Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2011-11.

as in new window
Length: 31
Date of creation: 12 Apr 2011
Date of revision:
Handle: RePEc:aah:create:2011-11

Contact details of provider:
Web page: http://www.econ.au.dk/afn/

Related research

Keywords: Realized variance; Long memory; fractional Brownian Motion; Measurement error; Whittle estimator.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Gabriele La Spada & Fabrizio Lillo, 2011. "The effect of round-off error on long memory processes," Papers 1107.4476, arXiv.org, revised Mar 2013.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:aah:create:2011-11. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.