Arbeitspapier
Finite sample accuracy of integrated volatility estimators
We consider the properties of three estimation methods for integrated volatility, i.e. realized volatility, the Fourier estimator, and the wavelet estimator, when a typical sample of high-frequency data is observed. We employ several different generating mechanisms for the instantaneous volatility process, e.g. Ornstein-Uhlenbeck, long memory, and jump processes. The possibility of market microstructure contamination is also entertained using a model with bid-ask bounce in which case alternative estimators with theoretical justification under market microstructure noise are also examined. The estimation methods are compared in a simulation study which reveals a general robustness towards persistence or jumps in the latent stochastic volatility process. However, bid-ask bounce effects render realized volatility and especially the wavelet estimator less useful in practice, whereas the Fourier method remains useful and is superior to the other two estimators in that case. More strikingly, even compared to bias correction methods for microstructure noise, the Fourier method is superior with respect to RMSE while having only slightly higher bias.
- Sprache
-
Englisch
- Erschienen in
-
Series: Queen's Economics Department Working Paper ; No. 1225
- Klassifikation
-
Wirtschaft
Statistical Simulation Methods: General
Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- Thema
-
bid-ask bounce
finite sample bias
integrated volatility
long memory
market microstructure
Monte Carlo simulation
realized volatility
wavelet
Bid-Ask Spread
Volatilität
Mikrostrukturanalyse
Monte-Carlo-Methode
Theorie
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Nielsen, Morten Ørregaard
Houmann Frederiksen, Per
- Ereignis
-
Veröffentlichung
- (wer)
-
Queen's University, Department of Economics
- (wo)
-
Kingston (Ontario)
- (wann)
-
2005
- Handle
- Letzte Aktualisierung
- 10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Nielsen, Morten Ørregaard
- Houmann Frederiksen, Per
- Queen's University, Department of Economics
Entstanden
- 2005
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