Bias in the Mean Reversion Estimator in Continuous-Time Gaussian and Lévy Processes
This paper develops the approximate finite-sample bias of the ordinary least squares or quasi max- imum likelihood estimator of the mean reversion parameter in continuous-time Levy processes. For the special case of Gaussian processes, our results reduce to those of Tang and Chen (2009) (when the long-run mean is unknown) and Yu (2012) (when the long-run mean is known). Simulations show that in general the approximate bias works well in capturing the true bias of the mean reversion estimator under difference scenarios. However, when the time span is small and the mean reversion parameter is approaching its lower bound, we nd it more difficult to approximate well the finite-sample bias.
|Date of creation:||Mar 2013|
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|Publication status:||Published in SMU Economics and Statistics Working Paper Series|
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- Jun Yu, 2007.
"Bias in the Estimation of the Mean Reversion Parameter in Continuous Time Models,"
CoFie-06-2008, Sim Kee Boon Institute for Financial Economics, revised Oct 2008.
- Yu, Jun, 2012. "Bias in the estimation of the mean reversion parameter in continuous time models," Journal of Econometrics, Elsevier, vol. 169(1), pages 114-122.
- Jun Yu, 2009. "Bias in the Estimation of the Mean Reversion Parameter in Continuous Time Models," Microeconomics Working Papers 23045, East Asian Bureau of Economic Research.
- Jun Yu, 2009. "Bias in the Estimation of the Mean Reversion Parameter in Continuous Time Models," Working Papers 16-2009, Singapore Management University, School of Economics.
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