A No-Arbitrage Approach to Range-Based Estimation of Return Covariances and Correlations

Michael W. Brandt and Francis Diebold

No 9664, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We extend range-based volatility estimation to the multivariate case. In particular, we propose a range-based covariance estimator motivated by a key financial economic consideration, the absence of arbitrage, in addition to statistical considerations. We show that this estimator is highly efficient yet robust to market microstructure noise arising from bid-ask bounce and asynchronous trading.

JEL-codes: G1 (search for similar items in EconPapers)
Date: 2003-05
New Economics Papers: this item is included in nep-cfn, nep-ets, nep-fin, nep-fmk and nep-rmg
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published as Michael W. Brandt & Francis X. Diebold, 2006. "A No-Arbitrage Approach to Range-Based Estimation of Return Covariances and Correlations," Journal of Business, University of Chicago Press, vol. 79(1), pages 61-74, January.

Downloads: (external link)
http://www.nber.org/papers/w9664.pdf (application/pdf)

Related works:
Journal Article: A No-Arbitrage Approach to Range-Based Estimation of Return Covariances and Correlations (2006)
Working Paper: A no-arbitrage approach to range-based estimation of return covariances and correlations (2004)
Working Paper: A No-Arbitrage Approach to Range-Based Estimation of Return Covariances and Correlations (2003)
Working Paper: A No-Arbitrage Approach to Range-Based Estimation of Return Covariances and Correlations
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:9664

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w9664

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 ().