 Range-Based Covariance Estimation Using High-Frequency Data: The Realized Co-Range -super-*Karim Bannouh, Dick van Dijk and Martin Martens Journal of Financial Econometrics, 2009, vol. 7, issue 4, 341-372 Abstract: We introduce the realized co-range, a novel estimator of the daily covariance between asset returns based on intraday high--low price ranges. In an ideal world, the co-range is five times more efficient than the realized covariance, which uses cross-products of intraday returns, when sampling at the same frequency. In Monte Carlo simulations, we find that for plausible levels of bid--ask bounce, infrequent trading and nonsynchronous trading, the realized co-range still improves upon the realized covariance. In a volatility timing strategy for S&P500, bond and gold futures, we find that the co-range estimates are less noisy, which results in lower transaction costs and higher Sharpe ratios. Copyright The Author 2009. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org., Oxford University Press. Date: 2009 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:jfinec:v:7:y:2009:i:4:p:341-372 Ordering information: This journal article can be ordered from 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. |
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