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Estimating the integrated volatility using high-frequency data with zero durations

Zhi Liu, Xin-Bing Kong and Bing-Yi Jing

Journal of Econometrics, 2018, vol. 204, issue 1, 18-32

Abstract: In estimating integrated volatility using high-frequency data, it is well documented that the presence of microstructure noise presents a major challenge. Recent literature has shown that the presence of multiple observations, a common feature in datasets, brings additional difficulty. In this study, we show that the preaveraging estimator is still consistent under multiple observations, and the related asymptotic distribution of the estimator is established. We also show that the preaveraging estimator based on multiple observations achieves the same asymptotic efficiency as the “ideal” estimator that assumes we know the exact trading times of all transactions. Simulation studies support the theoretical results, and we also illustrate the estimator using real data analysis.

Keywords: Itoˆ semimartingale; High frequency data; Multiple transactions; Realized power variations; Microstructure noise; Central limit theorem (search for similar items in EconPapers)
JEL-codes: C01 C02 C13 C14 C80 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.jeconom.2017.12.008

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Journal of Econometrics is currently edited by T. Amemiya, A. R. Gallant, J. F. Geweke, C. Hsiao and P. M. Robinson

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