Bootstrap Inference for Pre-averaged Realized Volatility based on Nonoverlapping Returns
Silvia Goncalves (),
Ulrich Hounyo and
Nour Meddahi
Journal of Financial Econometrics, 2014, vol. 12, issue 4, 679-707
Abstract:
The main contribution of this article is to propose bootstrap methods for realized volatility-like estimators defined on pre-averaged returns. In particular, we focus on the pre-averaged realized volatility estimator proposed by Podolskij and Vetter (2009). This statistic can be written (up to a bias correction term) as the (scaled) sum of squared pre-averaged returns, where the pre-averaging is done over all possible nonoverlapping blocks of consecutive observations. Pre-averaging reduces the influence of the noise and allows for realized volatility estimation on the pre-averaged returns. The nonoverlapping nature of the pre-averaged returns implies that these are asymptotically uncorrelated, but possibly heteroskedastic. This motivates the application of the wild bootstrap in this context. We provide a proof of the first-order asymptotic validity of this method for percentile and percentile-t intervals. Our Monte Carlo simulations show that the wild bootstrap can improve the finite sample properties of the existing first-order asymptotic theory provided we choose the external random variable appropriately. We use empirical work to illustrate its use in practice.
Date: 2014
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5)
Downloads: (external link)
http://hdl.handle.net/10.1093/jjfinec/nbu011 (application/pdf)
Access to full text is restricted to subscribers.
Related works:
Working Paper: Bootstrap inference for pre-averaged realized volatility based on non-overlapping returns (2013) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:oup:jfinec:v:12:y:2014:i:4:p:679-707.
Ordering information: This journal article can be ordered from
https://academic.oup.com/journals
Access Statistics for this article
Journal of Financial Econometrics is currently edited by Allan Timmermann and Fabio Trojani
More articles in Journal of Financial Econometrics from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().