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Does Anything Beat 5-Minute RV? A Comparison of Realized Measures Across Multiple Asset Classes

  • Kevin Sheppard
  • Lily Liu
  • Andrew J. Patton

We study the accuracy of a wide variety of estimators of asset price variation constructed from high-frequency data (so-called "realized measures"), and compare them with a simple "realized variance" (RV) estimator.� In total, we consider almost 400 different estimators, applied to 11 years of data on 31 different financial assets spanning five asset classes, including equities, equity indices, exchange rates and interest rates.� We apply data-based ranking methods to the realized measures and to forecasts based on these measures.� When 5-minute RV is taken as the benchmark realized measure, we find little evidence that it is outperformed by any of the other measures.� When using inference methods that do not require specifying a benchmark, we find some evidence that more sophisticated realized measures significantly outperform 5-minute RV.� In forecasting applications, we find that a low frequency "truncated" RV outperforms most other realized measures.� Overall, we conclude that it is difficult to significantly beat 5-minute RV.

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File URL: http://www.economics.ox.ac.uk/materials/papers/12626/paper645.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 645.

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Date of creation: 12 Feb 2013
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Handle: RePEc:oxf:wpaper:645
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