Estimation of High-Frequency Volatility: An Autoregressive Conditional Duration Approach

Yiu-kuen Tse and Thomas Tao Yang

Journal of Business & Economic Statistics, 2012, vol. 30, issue 4, 533-545

Abstract: We propose a method to estimate the intraday volatility of a stock by integrating the instantaneous conditional return variance per unit time obtained from the autoregressive conditional duration (ACD) model, called the ACD-ICV method. We compare the daily volatility estimated using the ACD-ICV method against several versions of the realized volatility (RV) method, including the bipower variation RV with subsampling, the realized kernel estimate, and the duration-based RV. Our Monte Carlo results show that the ACD-ICV method has lower root mean-squared error than the RV methods in almost all cases considered. This article has online supplementary material.

Date: 2012
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DOI: 10.1080/07350015.2012.707582

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