Test of Unbiasedness of the Integrated Covariance Estimation in the Presence of Noise

Masato Ubukata () and Kosuke Oya ()
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Masato Ubukata: Graduate School of Economics, Osaka University
Kosuke Oya: Graduate School of Economics, Osaka University

No 07-03-Rev, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: The cumulative covariance estimator in Hayashi and Yoshida (2005) which suits for non-synchronous observations possibly has a bias in the presence of the observational noise. We propose the test statistic to detect whether the observational noise causes a measurable bias in the estimator of Hayashi and Yoshida (2005). The test statistic proposed in this paper is asymptotically distributed as standard normal under null hypothesis. The finite sample performance of the test statistic is investigated through Monte Carlo simulation.

Keywords: test statistic; integrated covariance; non-synchronous observation; observational noise; market microstructure noise (search for similar items in EconPapers)
JEL-codes: C12 D49 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2007-04, Revised 2008-03
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:0703r

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