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The Effects of Random and Discrete Sampling When Estimating Continuous-Time Diffusions

  • Yacine Ait-Sahalia
  • Per A. Mykland

High-frequency financial data are not only discretely sampled in time but the time separating successive observations is often random. We analyze the consequences of this dual feature of the data when estimating a continuous-time model. In particular, we measure the additional effects of the randomness of the sampling intervals over and beyond those due to the discreteness of the data. We also examine the effect of simply ignoring the sampling randomness. We find that in many situations the randomness of the sampling has a larger impact than the discreteness of the data.

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File URL: http://www.nber.org/papers/t0276.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0276.

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Date of creation: Apr 2002
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Publication status: published as "The Effects of Random and Discrete Sampling When Estimating Continuous-Time Diffusions", Econometrica, Vol. 71, pp. 483-549 (2003)
Handle: RePEc:nbr:nberte:0276
Note: TWP
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  1. Robinson, P. M., 1977. "Estimation of a time series model from unequally spaced data," Stochastic Processes and their Applications, Elsevier, vol. 6(1), pages 9-24, November.
  2. Yacine Ait-Sahalia, 1995. "Nonparametric Pricing of Interest Rate Derivative Securities," NBER Working Papers 5345, National Bureau of Economic Research, Inc.
  3. Hansen, Lars Peter & Scheinkman, Jose Alexandre, 1995. "Back to the Future: Generating Moment Implications for Continuous-Time Markov Processes," Econometrica, Econometric Society, vol. 63(4), pages 767-804, July.
  4. Gourieroux, Christian & Monfort, Alain & Renault, Eric & Trognon, Alain, 1987. "Generalised residuals," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 5-32.
  5. Hasbrouck, Joel, 1991. " Measuring the Information Content of Stock Trades," Journal of Finance, American Finance Association, vol. 46(1), pages 179-207, March.
  6. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  7. Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521477444.
  8. Florens, Jean-Pierre & Fougere, Denis, 1996. "Noncausality in Continuous Time," Econometrica, Econometric Society, vol. 64(5), pages 1195-1212, September.
  9. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
  10. Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
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