Test of Unbiasedness of the Integrated Covariance Estimation in the Presence of Noise
AbstractThe cumulative covariance estimator in Hayashi and Yoshida (2005) 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 (2005). 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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Bibliographic InfoPaper 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-Rev.
Length: 24 pages
Date of creation: Apr 2007
Date of revision: Mar 2008
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 and Methodology: General - - - Hypothesis Testing: General
- D49 - Microeconomics - - Market Structure and Pricing - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-14 (All new papers)
- NEP-ECM-2007-04-14 (Econometrics)
- NEP-ETS-2007-04-14 (Econometric Time Series)
- NEP-MST-2007-04-14 (Market Microstructure)
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