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Test of Unbiasedness of the Integrated Covariance Estimation in the Presence of Noise

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Author Info
Masato Ubukata () (Graduate School of Economics, Osaka University)
Kosuke Oya () (Graduate School of Economics, Osaka University)
Abstract

The cumulative covariance estimator in Hayashi and Yoshida (2005b) which suits for non-synchronous observations possibly has a bias in the presence of the observational noise. We propose the test statistic to detect whether the observational noise causes a measurable bias in the estimator of Hayashi and Yoshida (2005b). The test statistic proposed in this paper is asymptotically distributed as standard normal under null hypothesis. The finite sample performance of the test statistic is investigated through Monte Carlo simulation.

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Publisher Info
Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 07-03.

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Length: 24 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:osk:wpaper:0703

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Related research
Keywords: test statistic integrated covariance non-synchronous observation observational noise market microstructure noise

Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
D49 - Microeconomics - - Market Structure and Pricing - - - Other

This paper has been announced in the following NEP Reports:

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. Nelson, Daniel B., 1990. "ARCH models as diffusion approximations," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 7-38. [Downloadable!] (restricted)
  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, vol. 100, pages 1394-1411, December. [Downloadable!] (restricted)
    Other versions:
  4. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March. [Downloadable!] (restricted)
  5. Taro Kanatani, 2004. "Integrated volatility measuring from unevenly sampled observations," Economics Bulletin, Economics Bulletin, vol. 3(36), pages 1-8. [Downloadable!]
  6. Valeri Voev & Asger Lunde, 2007. "Integrated Covariance Estimation using High-frequency Data in the Presence of Noise," Journal of Financial Econometrics, Oxford University Press, vol. 5(1), pages 68-104. [Downloadable!] (restricted)
  7. Maria Elvira Mancino & Paul Malliavin, 2002. "Fourier series method for measurement of multivariate volatilities," Finance and Stochastics, Springer, vol. 6(1), pages 49-61. [Downloadable!] (restricted)
  8. Barucci, Emilio & Reno, Roberto, 2002. "On measuring volatility of diffusion processes with high frequency data," Economics Letters, Elsevier, vol. 74(3), pages 371-378, February. [Downloadable!] (restricted)
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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. Taro Kanatani, 2007. "Finite Sample Analysis of Weighted Realized Covariance with Noisy Asynchronous Observations," Working Papers 634, Kyoto University, Institute of Economic Research. [Downloadable!]
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