A Robust Estimation of Integrated Volatility under Round-off Errors, Micro-market Price Adjustments and Noises

Seisho Sato and Naoto Kunitomo
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Seisho Sato: Faculty of Economics, The University of Tokyo
Naoto Kunitomo: Faculty of Economics, The University of Tokyo

No CIRJE-F-964, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: For estimating the integrated volatility by using high frequency data, Kunitomo and Sato (2008, 2011, 2013) have proposed the Separating Information Maximum Likelihood (SIML) method when there are micro-market noises. The SIML estimator has reasonable nite sample properties and asymptotic properties when the sample size is large under reasonable conditions. We show that the SIML estimator has the robustness properties in the sense that it is consistent and has the stable convergence (i.e. the asymptotic normality in the deterministic case) when there are round- off errors and micro-market price adjustments and noises for the underlying (continuous time) stochastic process. The SIML estimation has also reasonable nite sample properties with these effects and dominate the existing methods such as the realized kernel method and the pre-averaging method in some situations. --

Pages: 45pages
Date: 2015-03
New Economics Papers: this item is included in nep-ecm and nep-mst
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