Microstructure Noise, Realized Variance, and Optimal Sampling.
A recent and extensive literature has pioneered the summing of squared observed intra-daily returns, “realized variance”, to estimate the daily integrated variance of financial asset prices, a traditional object of economic interest. We show that, in the presence of market microstructure noise, real...
| Publicado en: | Review of Economic Studies Vol. 75; no. 2; pp. 339 - 370 |
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| Autores principales: | , |
| Formato: | Artículo |
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Oxford University Press / UK
April 2008
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| Acceso en línea: | Ver este registro en EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=ssf&AN=511373492&site=ehost-live header: @attributes: shortDbName: ssf uiTerm: 511373492 longDbName: Social Sciences Full Text (H.W. Wilson) uiTag: AN controlInfo: bkinfo: jinfo: jid: 00346527 REM jtl: Review of Economic Studies issn: 00346527 maglogo: N pubinfo: dt: April 2008 vid: 75 iid: 2 pid: 622 pub: Oxford University Press / UK artinfo: ui: 511373492 10.1111/j.1467-937X.2008.00474.x ppf: 339 ppct: 31 formats: tig: atl: Microstructure Noise, Realized Variance, and Optimal Sampling. aug: au: Bandi, F. M. Russell, J. R. su: Information theory in economics Statistical sampling Variances sug: subj: Information theory in economics Statistical sampling Variances ab: A recent and extensive literature has pioneered the summing of squared observed intra-daily returns, “realized variance”, to estimate the daily integrated variance of financial asset prices, a traditional object of economic interest. We show that, in the presence of market microstructure noise, realized variance does not identify the daily integrated variance of the frictionless equilibrium price. However, we demonstrate that the noise-induced bias at very high sampling frequencies can be appropriately traded off with the variance reduction obtained by high-frequency sampling and derive a mean-squared-error (MSE) optimal sampling theory for the purpose of integrated variance estimation. We show how our theory naturally leads to an identification procedure, which allows us to recover the moments of the unobserved noise; this procedure may be useful in other applications. Finally, using the profits obtained by option traders on the basis of alternative variance forecasts as our economic metric, we find that explicit optimization of realized variance's finite sample MSE properties results in accurate forecasts and considerable economic gains. Reprinted by permission of the publisher. pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: N holdings: @attributes: islocal: N |
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