Robust Estimation of Realized Correlation: New Insight about Intraday Fluctuations in Market Betas

Peter Hansen and Yiyao Luo

Papers from arXiv.org

Abstract: Time-varying volatility is an inherent feature of most economic time-series, which causes standard correlation estimators to be inconsistent. The quadrant correlation estimator is consistent but very inefficient. We propose a novel subsampled quadrant estimator that improves efficiency while preserving consistency and robustness. This estimator is particularly well-suited for high-frequency financial data and we apply it to a large panel of US stocks. Our empirical analysis sheds new light on intra-day fluctuations in market betas by decomposing them into time-varying correlations and relative volatility changes. Our results show that intraday variation in betas is primarily driven by intraday variation in correlations.

Date: 2023-10
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-mst and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2310.19992 Latest version (application/pdf)

Related works:
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:arx:papers:2310.19992

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().