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Microstructure noise in the continuous case: The pre-averaging approach

Author

Listed:
  • Jacod, Jean
  • Li, Yingying
  • Mykland, Per A.
  • Podolskij, Mark
  • Vetter, Mathias

Abstract

This paper presents a generalized pre-averaging approach for estimating the integrated volatility, in the presence of noise. This approach also provides consistent estimators of other powers of volatility -- in particular, it gives feasible ways to consistently estimate the asymptotic variance of the estimator of the integrated volatility. We show that our approach, which possesses an intuitive transparency, can generate rate optimal estimators (with convergence rate n-1/4).

Suggested Citation

  • Jacod, Jean & Li, Yingying & Mykland, Per A. & Podolskij, Mark & Vetter, Mathias, 2009. "Microstructure noise in the continuous case: The pre-averaging approach," Stochastic Processes and their Applications, Elsevier, vol. 119(7), pages 2249-2276, July.
  • Handle: RePEc:eee:spapps:v:119:y:2009:i:7:p:2249-2276
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