A Functional Filtering and Neighborhood Truncation Approach to Integrated Quarticity Estimation

Torben Andersen, Dobrislav Dobrev and Ernst Schaumburg

No 17152, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We provide a first in-depth look at robust estimation of integrated quarticity (IQ) based on high frequency data. IQ is the key ingredient enabling inference about volatility and the presence of jumps in financial time series and is thus of considerable interest in applications. We document the significant empirical challenges for IQ estimation posed by commonly encountered data imperfections and set forth three complementary approaches for improving IQ based inference. First, we show that many common deviations from the jump diffusive null can be dealt with by a novel filtering scheme that generalizes truncation of individual returns to truncation of arbitrary functionals on return blocks. Second, we propose a new family of efficient robust neighborhood truncation (RNT) estimators for integrated power variation based on order statistics of a set of unbiased local power variation estimators on a block of returns. Third, we find that ratio-based inference, originally proposed by Barndorff-Nielsen and Shephard, has desirable robustness properties and is well suited for our empirical applications. We confirm that the proposed filtering scheme and the RNT estimators perform well in our extensive simulation designs and in an application to the individual Dow Jones 30 stocks.

JEL-codes: G12 G13 G17 (search for similar items in EconPapers)
Date: 2011-06
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Andersen, Torben, Dobrislav Dobrev and Ernst Schaumburg. 2014. A Robust Neighborhood Truncation Approach to Estimation of Integrated Quarticity. Econometric Theory. 30: 3-59.

Downloads: (external link)
http://www.nber.org/papers/w17152.pdf (application/pdf)

Related works:
Working Paper: A Functional Filtering and Neighborhood Truncation Approach to Integrated Quarticity Estimation (2011)
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:nbr:nberwo:17152

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w17152

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().