Optimal design of Fourier estimator in the presence of microstructure noise

Fangfang Wang

Computational Statistics & Data Analysis, 2014, vol. 76, issue C, 708-722

Abstract: The Fourier estimator of Malliavin and Mancino depends on both sample size and a so-called cutting frequency. The latter controls the number of Fourier coefficients to be included, and it also determines how the Fourier estimator responds to market microstructure noise. By examining the finite sample properties of the Fourier estimator, an easy-to-implement procedure is developed for the optimal cutting frequency which minimizes the mean squared error in the presence of the microstructure noise, along with a modified Whittle likelihood approach for the estimation of the signal-to-noise ratio.

Keywords: Discrete Fourier transform; Quadratic variation; Microstructure noise; Periodogram; Spectral density; Whittle likelihood (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:csdana:v:76:y:2014:i:c:p:708-722

DOI: 10.1016/j.csda.2013.08.003

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