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Covariance estimation via Fourier method in the presence of asynchronous trading and microstructure noise

S. Sanfelici and Maria Elvira Mancino

No 2008-ME01, Economics Department Working Papers from Department of Economics, Parma University (Italy)

Abstract: We analyze the effects of market microstructure noise on the Fourier estimator of multivariate volatilities. We prove that the estimator is consistent in the case of asynchronous data and robust in the presence of microstructure noise. This result is obtained through an analytical computation of the bias and the mean squared error of the Fourier estimator and con¯rmed by Monte Carlo experiments.

JEL-codes: C14 C32 G1 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2008
New Economics Papers: this item is included in nep-ecm and nep-mst
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