Bipower-type estimation in a noisy diffusion setting

Mark Podolskij () and Mathias Vetter ()
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Mathias Vetter: School of Economics and Management, University of Aarhus, Denmark and CREATES, Postal: 8000 Aarhus C, Denmark

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We consider a new class of estimators for volatility functionals in the setting of frequently observed Itô diffusions which are disturbed by i.i.d. noise. These statistics extend the approach of pre-averaging as a general method for the estimation of the integrated volatility in the presence of microstructure noise and are closely related to the original concept of bipower variation in the no-noise case. We show that this approach provides efficient estimators for a large class of integrated powers of volatility and prove the associated (stable) central limit theorems. In a more general Itô semimartingale framework this method can be used to define both estimators for the entire quadratic variation of the underlying process and jump-robust estimators which are consistent for various functionals of volatility. As a by-product we obtain a simple test for the presence of jumps in the underlying semimartingale.

Keywords: Bipower Variation; Central Limit Theorem; High-Frequency Data; Microstructure Noise; Quadratic Variation; Semimartingale Theory; Test for Jumps (search for similar items in EconPapers)
JEL-codes: C10 C13 C14 (search for similar items in EconPapers)
Pages: 42
Date: 2008-05-26
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Bipower-type estimation in a noisy diffusion setting (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2008-25

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