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Subsampling realised kernels

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Author Info

  • Ole E. Barndorff-Nielsen

    ()
    (University of Aarhus)

  • Peter Reinhard Hansen

    ()
    (Stanford University)

  • Asger Lunde

    ()
    (Aarhus School of Business)

  • Neil Shephard

    ()
    (Nuffield College, University of Oxford)

Abstract

In a recent paper we have introduced the class of realised kernel estimators of the increments of quadratic variation in the presence of noise. We showed that this estimator is consistent and derived its limit distribution under various assumptions on the kernel weights. In this paper we extend our analysis, looking at the class of subsampled realised kernels and we derive the limit theory for this class of estimators. We find that subsampling is highly advantageous for estimators based on discontinuous kernels, such as the truncated kernel. For kinked kernels, such as the Bartlett kernel, we show that subsampling is impotent, in the sense that subsampling has no effect on the asymptotic distribution. Perhaps surprisingly, for the efficient smooth kernels, such as the Parzen kernel, we show that subsampling is harmful as it increases the asymptotic variance. We also study the performance of subsampled realised kernels in simulations and in empirical work.

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File URL: http://www.nuffield.ox.ac.uk/economics/papers/2006/w10/subsampling6.pdf
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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2006-W10.

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Length: 41 pages
Date of creation: 20 Aug 2006
Date of revision:
Handle: RePEc:nuf:econwp:0610

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Web page: http://www.nuff.ox.ac.uk/economics/

Related research

Keywords: Bipower variation; Long run variance estimator; Market frictions; Quadratic variation; Realised kernel; Realised variance; Subsampling.;

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  1. GHYSELS, Eric & HARVEY, Andrew & RENAULT, Eric, 1995. "Stochastic Volatility," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1995069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Ole E. Barndorff-Nielsen & Peter Reinhard Hansen & Asger Lunde & Neil Shephard, 2008. "Designing Realized Kernels to Measure the ex post Variation of Equity Prices in the Presence of Noise," Econometrica, Econometric Society, Econometric Society, vol. 76(6), pages 1481-1536, November.
  3. Zhang, Lan & Mykland, Per A. & Ait-Sahalia, Yacine, 2005. "A Tale of Two Time Scales: Determining Integrated Volatility With Noisy High-Frequency Data," Journal of the American Statistical Association, American Statistical Association, American Statistical Association, vol. 100, pages 1394-1411, December.
  4. Barndorff-Nielsen, Ole E. & Graversen, Svend Erik & Jacod, Jean & Shephard, Neil, 2006. "Limit Theorems For Bipower Variation In Financial Econometrics," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 22(04), pages 677-719, August.
  5. Ole E. Barndorff-Nielsen & Neil Shephard, 2000. "Econometric analysis of realised volatility and its use in estimating stochastic volatility models," Economics Papers, Economics Group, Nuffield College, University of Oxford 2001-W4, Economics Group, Nuffield College, University of Oxford, revised 05 Jul 2001.
  6. Aït-Sahalia, Yacine & Mykland, Per A. & Zhang, Lan, 2011. "Ultra high frequency volatility estimation with dependent microstructure noise," Journal of Econometrics, Elsevier, Elsevier, vol. 160(1), pages 160-175, January.
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  18. Zhou, Bin, 1996. "High-Frequency Data and Volatility in Foreign-Exchange Rates," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 14(1), pages 45-52, January.
  19. Ilze Kalnina & Oliver Linton, 2006. "Estimating Quadratic VariationConsistently in thePresence of Correlated MeasurementError," STICERD - Econometrics Paper Series, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE /2006/509, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  20. Sílvia Gonçalves & Nour Meddahi, 2009. "Bootstrapping Realized Volatility," Econometrica, Econometric Society, Econometric Society, vol. 77(1), pages 283-306, 01.
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