EconPapers    
Economics at your fingertips  
 

An Optimal Weight for Realized Variance Based on Intermittent High-Frequency Data

Hiroki Masuda and Takayki Morimoto

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: In Japanese stock markets, there are two kinds of breaks, i.e., nighttime and lunch break, where we have no trading, entailing inevitable increase of variance in estimating daily volatility via naive realized variance (RV). In order to perform a much more stabilized estimation, we are concerned here with a modification of the weighting technique of Hansen and Lunde (2005). As an empirical study, we estimate optimal weights in a certain sense for Japanese stock data listed on the Tokyo Stock Exchange. We found that, in most stocks appropriate use of the optimally weighted RV can lead to remarkably smaller estimation variance compared with naive RV, hence substantially to more accurate forecasting of daily volatility.

Keywords: high-frequency data; market microstructure noise; realized volatility; Japanese stock markets; variance of realized variance (search for similar items in EconPapers)
JEL-codes: C19 C22 C51 (search for similar items in EconPapers)
Date: 2009-02
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-fmk and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd08-033.pdf (application/pdf)

Related works:
Journal Article: OPTIMAL WEIGHT FOR REALIZED VARIANCE BASED ON INTERMITTENT HIGH-FREQUENCY DATA (2012) Downloads
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:hst:ghsdps:gd08-033

Access Statistics for this paper

More papers in Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University Contact information at EDIRC.
Bibliographic data for series maintained by Tatsuji Makino ().

 
Page updated 2024-05-15
Handle: RePEc:hst:ghsdps:gd08-033