Microstructure noise in the continuous case: Approximate efficiency of the adaptive pre-averaging method

Jean Jacod and Per A. Mykland

Stochastic Processes and their Applications, 2015, vol. 125, issue 8, 2910-2936

Abstract: This paper introduces adaptiveness to the non-parametric estimation of volatility in high frequency data. We consider general continuous Itô processes contaminated by microstructure noise. In the context of pre-averaging, we show that this device gives rise to estimators that are within 7% of the commonly conjectured “quasi-lower bound” for asymptotic efficiency. The asymptotic variance is of the form constant × bound, where the constant does not depend on the process to be estimated. The results hold with mild assumptions on the noise, and extend to mildly irregular observations.

Keywords: Adaptive estimation; Discrete observation; Efficiency; High frequency data; Itô process; Leverage effect; Microstructure; Pre-averaging; Realized volatility; Semi-martingale; Stable convergence (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:spapps:v:125:y:2015:i:8:p:2910-2936

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DOI: 10.1016/j.spa.2015.02.005

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