On Properties of Separating Information Maximum Likelihood Estimation of Realized Volatility and Covariance with Micro-Market Noise
For estimating the realized volatility and covariance by using high frequency data, we have introduced the Separating Information Maximum Likelihood (SIML) method when there are possibly micro-market noises by Kunitomo and Sato (2008a, 2008b, 2010a, 2010b). The resulting estimator is simple and it has the representation as a specific quadratic form of returns. We show that the SIML estimator has reasonable asymptotic properties; it is consistent and it has the asymptotic normality (or the stable convergence in the general case) when the sample size is large under general conditions including some non-Gaussian processes and some volatility models. Based on simulations, we find that the SIML estimator has reasonable finite sample properties and thus it would be useful for practice. The SIML estimator has the asymptotic robustness properties in the sense it is consistent when the noise terms are weakly dependent and they are endogenously correlated with the efficient market price process. We also apply our method to an analysis of Nikkei-225 Futures, which has been the major stock index in the Japanese financial sector.
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- Zhang, Lan & Mykland, Per A. & Ait-Sahalia, Yacine, 2005.
"A Tale of Two Time Scales: Determining Integrated Volatility With Noisy High-Frequency Data,"
Journal of the American Statistical Association,
American Statistical Association, vol. 100, pages 1394-1411, December.
- Lan Zhang & Per A. Mykland & Yacine Ait-Sahalia, 2003. "A Tale of Two Time Scales: Determining Integrated Volatility with Noisy High Frequency Data," NBER Working Papers 10111, National Bureau of Economic Research, Inc.
- Ole E. Barndorff-Nielsen & Peter Reinhard Hansen & Asger Lunde & Neil Shephard, 2008. "Designing Realized Kernels to Measure the ex post Variation of Equity Prices in the Presence of Noise," Econometrica, Econometric Society, vol. 76(6), pages 1481-1536, November.
- Ole E Barndorff-Nielsen & Peter Hansen & Asger Lunde & Neil Shephard, 2006. "Designing realised kernels to measure the ex-post variation of equity prices in the presence of noise," OFRC Working Papers Series 2006fe05, Oxford Financial Research Centre.
- Ole E. Barndorff-Nielsen & Peter Reinhard Hansen & Asger Lunde & Neil Shephard, 2006. "Designing realised kernels to measure the ex-post variation of equity prices in the presence of noise," Economics Papers 2006-W03, Economics Group, Nuffield College, University of Oxford.
- Yacine Aït-Sahalia, 2005. "How Often to Sample a Continuous-Time Process in the Presence of Market Microstructure Noise," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 351-416.
- Yacine Ait-Sahalia & Per A. Mykland, 2003. "How Often to Sample a Continuous-Time Process in the Presence of Market Microstructure Noise," NBER Working Papers 9611, National Bureau of Economic Research, Inc.
- Hansen, Peter R. & Lunde, Asger, 2006. "Realized Variance and Market Microstructure Noise," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 127-161, April. Full references (including those not matched with items on IDEAS)
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