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Realised Quantile-Based Estimation of the Integrated Variance

Author

Listed:
  • Kim Christensen

    () (Aarhus University and CREATES)

  • Roel Oomen

    () (Deutsche Bank, London, UK and the Department of Quantitative Economics, the University of Amsterdam, The Netherlands)

  • Mark Podolskij

    () (ETH Zürich, Switzerland and CREATES)

Abstract

In this paper, we propose a new jump robust quantile-based realised variancemeasure of ex-post return variation that can be computed using potentially noisy data. This new estimator is consistent for integrated variance and we present feasible central limit theorems which show that it converges at the best attainable rate and has excellent efficiency. Asymptotically, the quantile-based realised variance is immune to finite activity jumps and outliers in the price series, while in modified form the estimator is applicable with market microstructure noise and therefore operational on highfrequency data. Simulations show that it also has superior robustness properties in finite samples, while an empirical application illustrates its use on equity data.

Suggested Citation

  • Kim Christensen & Roel Oomen & Mark Podolskij, 2009. "Realised Quantile-Based Estimation of the Integrated Variance," CREATES Research Papers 2009-27, Department of Economics and Business Economics, Aarhus University.
  • Handle: RePEc:aah:create:2009-27
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    References listed on IDEAS

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    More about this item

    Keywords

    Finite activity jumps; Integrated variance; Market microstructure noise; Order statistics; Outliers; Realised variance;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General

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