Multivariate realised kernels: consistent positive semi-definite estimators of the covariation of equity prices with noise and non-synchronous trading

Ole Barndorff-Nielsen, Peter Hansen, Asger Lunde () and Neil Shephard ()

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We propose a multivariate realised kernel to estimate the ex-post covariation of log-prices. We show this new consistent estimator is guaranteed to be positive semi-definite and is robust to measurement noise of certain types and can also handle non-synchronous trading. It is the first estimator which has these three properties which are all essential for empirical work in this area. We derive the large sample asymptotics of this estimator and assess its accuracy using a Monte Carlo study. We implement the estimator on some US equity data, comparing our results to previous work which has used returns measured over 5 or 10 minutes intervals. We show the new estimator is substantially more precise.

Keywords: HAC estimator; Long run variance estimator; Market frictions; Quadratic variation; Realised variance (search for similar items in EconPapers)
JEL-codes: C13 C32 (search for similar items in EconPapers)
Pages: 41
Date: 2008-12-11
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

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https://repec.econ.au.dk/repec/creates/rp/08/rp08_63.pdf (application/pdf)

Related works:
Journal Article: Multivariate realised kernels: Consistent positive semi-definite estimators of the covariation of equity prices with noise and non-synchronous trading (2011)
Working Paper: Multivariate realised kernels: Consistent positive semi-definite estimators of the covariation of equity prices with noise and non-synchronous trading (2011)
Working Paper: Multivariate Realised Kernels: Consistent Positive Semi-Definite Estimators of the Covariation of Equity Prices with Noise and Non-Synchronous Trading (2009)
Working Paper: Multivariate realised kernels: consistent positive semi-definite estimators of the covariation of equity prices with noise and non-synchronous trading (2008)
Working Paper: Multivariate realised kernels: consistent positive semi-definite estimators of the covariation of equity prices with noise and non-synchronous trading (2008)
Working Paper: Multivariate realised kernels: consistent positive semi-definite estimators of the covariation of equity prices with noise and non-synchronous trading (2008)
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