The DOI matches its Crossref record; 5 of the 5 references it cites were found in a registry or an index.
A Tale of Two Time Scales: Determining Integrated Volatility With Noisy High-Frequency Data
Abstract
It is a common practice in finance to estimate volatility from the sum of frequently sampled squared returns. However, market microstructure poses challenges to this estimation approach, as evidenced by recent empirical studies in finance. The present work attempts to lay out theoretical grounds that reconcile continuous-time modeling and discrete-time samples. We propose an estimation approach that takes advantage of the rich sources in tick-by-tick data while preserving the continuous-time assumption on the underlying returns. Under our framework, it becomes clear why and where the “usual” volatility estimator fails when the returns are sampled at the highest frequencies. If the noise is asymptotically small, our work provides a way of finding the optimal sampling frequency. A better approach, the “two-scales estimator,” works for any size of the noise.
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Cites
Heston, S. L. (1993) · Review of Financial Studies · doi:10.1093/rfs/6.2.327 · Cited by 8,762
Econometric Analysis of Realized Volatility and its Use in Estimating Stochastic Volatility Models
Barndorff-Nielsen, O. E., & Shephard, N. (2002) · Journal of the Royal Statistical Society Series B: Statistical Methodology · doi:10.1111/1467-9868.00336 · Cited by 2,215
The Distribution of Realized Exchange Rate Volatility
Andersen, T. G., Bollerslev, T., Diebold, F. X., & Labys, P. (2001) · Journal of the American Statistical Association · doi:10.1198/016214501750332965 · Cited by 2,104
How Often to Sample a Continuous-Time Process in the Presence of Market Microstructure Noise
Aït-Sahalia, Y., Mykland, P. A., & Zhang, L. (2005) · Review of Financial Studies · doi:10.1093/rfs/hhi016 · Cited by 875
Self-citationGallant, A. R., Hsu, C.-T., & Tauchen, G. (1999) · Review of Economics and Statistics · doi:10.1162/003465399558481 · Cited by 267
Cited by
Andersen, T. G., Bollerslev, T., & Diebold, F. X. (2007) · Review of Economics and Statistics · doi:10.1162/rest.89.4.701 · Cited by 1,445
Realized Variance and Market Microstructure Noise
Hansen, P. R., & Lunde, A. (2006) · Journal of Business & Economic Statistics · doi:10.1198/073500106000000071 · Cited by 1,160
BOLLERSLEV, T., & TODOROV, V. (2011) · The Journal of Finance · doi:10.1111/j.1540-6261.2011.01695.x · Cited by 804
Realized kernels in practice: trades and quotes
Barndorff‐Nielsen, O. E., Hansen, P. R., Lunde, A., & Shephard, N. (2009) · The Econometrics Journal · doi:10.1111/j.1368-423x.2008.00275.x · Cited by 640
Exploiting the errors: A simple approach for improved volatility forecasting
Bollerslev, T., Patton, A. J., & Quaedvlieg, R. (2016) · Journal of Econometrics · doi:10.1016/j.jeconom.2015.10.007 · Cited by 444
Metadata
- Authors
- Zhang, L., Mykland, P. A., & Aït-Sahalia, Y.
- Venue
- Journal of the American Statistical Association
- Publisher
- Informa UK Limited
- Published
- 2005-12
- Volume
- 100
- Issue
- 472
- Pages
- 1394-1411
- ISSN
- 0162-1459 (ISSN-L)
- 1537-274X
- OpenAlex
- W3095114851
- Cited by
- 1,306
- References
- 5
- FWCI
- 58.50
- Type
- journal article
- Language
- en
- Open access
- closed
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