Between data cleaning and inference: Pre-averaging and robust estimators of the efficient price

Per A. Mykland and Lan Zhang

Journal of Econometrics, 2016, vol. 194, issue 2, 242-262

Abstract: Pre-averaging is a popular strategy for mitigating microstructure in high frequency financial data. As the term suggests, transaction or quote data are averaged over short time periods ranging from 30 s to five min, and the resulting averages approximate the efficient price process much better than the raw data. Apart from reducing the size of the microstructure, the methodology also helps synchronise data from different securities. The procedure is robust to short term dependence in the noise.

Keywords: Consistency; Cumulants; Contiguity; Continuity; Discrete observation; Efficiency; Equivalent martingale measure; High frequency data; Jumps; Leverage effect; M-estimation; Medianisation; Microstructure; Pre-averaging; Realised beta; Realised volatility; Robust estimation; Semi-martingale; Stable convergence (search for similar items in EconPapers)
JEL-codes: C01 C02 C13 C14 C22 G11 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:194:y:2016:i:2:p:242-262

DOI: 10.1016/j.jeconom.2016.05.005

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