 Fixed‐k inference for volatilityTim Bollerslev, Jia Li and Zhipeng Liao Quantitative Economics, 2021, vol. 12, issue 4, 1053-1084 Abstract: We present a new theory for the conduct of nonparametric inference about the latent spot volatility of a semimartingale asset price process. In contrast to existing theories based on the asymptotic notion of an increasing number of observations in local estimation blocks, our theory treats the estimation block size k as fixed. While the resulting spot volatility estimator is no longer consistent, the new theory permits the construction of asymptotically valid and easy‐to‐calculate pointwise confidence intervals for the volatility at any given point in time. Extending the theory to a high‐dimensional inference setting with a growing number of estimation blocks further permits the construction of uniform confidence bands for the volatility path. An empirically realistically calibrated simulation study underscores the practical reliability of the new inference procedures. An empirical application based on intraday data for the S&P 500 equity index reveals highly significant abrupt changes, or jumps, in the market volatility at FOMC news announcement times, validating recent uses of various high‐frequency‐based identification schemes in asset pricing finance and monetary economics. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:quante:v:12:y:2021:i:4:p:1053-1084 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Quantitative Economics from Econometric Society Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.