Realized candlestick wicks

Yifan Li, Ingmar Nolte, Sandra Nolte and Shifan Yu

Journal of Econometrics, 2025, vol. 250, issue C

Abstract: We develop a novel nonparametric estimator of integrated variance by summing up the squared wick lengths of intraday candlesticks over a fixed time interval. The proposed wick-based estimator is robust to short-lived extreme price movements, such as gradual jumps and flash crashes. We investigate the asymptotic properties of the proposed estimator, and show that its asymptotic variance is about four times smaller than the state-of-the-art differenced-return volatility (DV) estimator. We also develop a Hausman-type test for the presence of both jumps and episodic extreme price movements. Monte Carlo simulations and empirical applications further validate the practical reliability of our proposed estimator.

Keywords: High-frequency data; Integrated variance; Range-based volatility estimation; Drift burst; Extreme price movements (search for similar items in EconPapers)
JEL-codes: C14 C22 C58 G14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:250:y:2025:i:c:s0304407625000685

DOI: 10.1016/j.jeconom.2025.106014

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