Realised quantile-based estimation of the integrated variance

Realised quantile-based estimation of the integrated variance In this paper, we propose a new jump-robust quantile-based realised variance measure of ex post return variation that can be computed using potentially noisy data. The estimator is consistent for the integrated variance and we present feasible central limit theorems which show that it converges at the best attainable rate and has excellent efficiency. Asymptotically, the quantile-based realised variance is immune to finite activity jumps and outliers in the price series, while in modified form the estimator is applicable with market microstructure noise and therefore operational on high-frequency data. Simulations show that it has superior robustness properties in finite sample, while an empirical application illustrates its use on equity data. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Econometrics Elsevier

Realised quantile-based estimation of the integrated variance

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Publisher
Elsevier
Copyright
Copyright © 2010 Elsevier B.V.
ISSN
0304-4076
eISSN
1872-6895
D.O.I.
10.1016/j.jeconom.2010.04.008
Publisher site
See Article on Publisher Site

Abstract

In this paper, we propose a new jump-robust quantile-based realised variance measure of ex post return variation that can be computed using potentially noisy data. The estimator is consistent for the integrated variance and we present feasible central limit theorems which show that it converges at the best attainable rate and has excellent efficiency. Asymptotically, the quantile-based realised variance is immune to finite activity jumps and outliers in the price series, while in modified form the estimator is applicable with market microstructure noise and therefore operational on high-frequency data. Simulations show that it has superior robustness properties in finite sample, while an empirical application illustrates its use on equity data.

Journal

Journal of EconometricsElsevier

Published: Nov 1, 2010

References

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