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

Listed author(s):
  • 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
Handle: RePEc:oxf:wpaper:645
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