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Robustness of the Separating Information Maximum Likelihood Estimation of Realized Volatility with Micro-Market Noise

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  • Naoto Kunitomo

    (Faculty of Economics, University of Tokyo)

  • Seisho Sato

    (Institute of Statistical Mathematics)

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    Abstract

    For estimating the realized volatility and covariance by using high frequency data, Kunitomo and Sato (2008a,b) have proposed the Separating Information Maximum Likelihood (SIML) method when there are micro-market noises. The SIML estimator has reasonable asymptotic properties; it is consistent and it has the asymptotic normality (or the stable convergence in the general case) when the sample size is large under general conditions including non-Gaussian processes and volatility models. We also show that the SIML estimator has the asymptotic robustness in the sense that it is consistent and it has the asymptotic normality when there are autocorrelations in the market noise terms and there are endogenous correlations between the signal and noise terms.

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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2010/2010cf733.pdf
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    Bibliographic Info

    Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-733.

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    Length: 27pages
    Date of creation: Apr 2010
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    Handle: RePEc:tky:fseres:2010cf733

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    1. 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, vol. 76(6), pages 1481-1536, November.
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    Cited by:
    1. Kunitomo, Naoto & Sato, Seisho, 2013. "Separating Information Maximum Likelihood estimation of the integrated volatility and covariance with micro-market noise," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 282-309.

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