Estimating Integrated Volatility Using Absolute High-Frequency Returns

Ysusi Carla

No 2006-13, Working Papers from Banco de México

Abstract: When high-frequency data is available, in the context of a stochastic volatility model, realised absolute variation can estimate integrated spot volatility. A central limit theory enables us to do filtering and smoothing using model-based and model-free approaches in order to improve the precision of these estimators. Although the absolute values are empirically attractive as they are less sensitive to possible large movements in high-frequency data, realised absolute variation does not estimate integrated variance. Some problems arise when using a finite number of intra-day observations, as explained here.

JEL-codes: C13 C51 G19 (search for similar items in EconPapers)
Date: 2006-12
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mst
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