Estimating spot volatility with high-frequency financial data

Zu, Yang; Boswijk, Peter

Abstract

We construct a spot volatility estimator for high-frequency financial data which contain market microstructure noise. We prove consistency and derive the asymptotic distribution of the estimator. A data-driven method is proposed to select the
scale parameter and the bandwidth parameter in the estimator. In Monte Carlo simulations, we compare the finite sample performance of our estimator with some existing estimators. Empirical examples are given to illustrate the potential applications of the estimator.

Citation

Zu, Y., & Boswijk, P. (2014). Estimating spot volatility with high-frequency financial data. Journal of Econometrics, 181(2), https://doi.org/10.1016/j.jeconom.2014.04.001

• Journal Article Type: Article
• Acceptance Date: Jan 19, 2014
• Online Publication Date: Apr 19, 2014
• Publication Date: Aug 1, 2014
• Deposit Date: Sep 13, 2017
• Publicly Available Date: Sep 13, 2017
• Journal: Journal of Econometrics
• Print ISSN: 0304-4076
• Electronic ISSN: 1872-6895
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 181
• Issue: 2
• DOI: https://doi.org/10.1016/j.jeconom.2014.04.001
• Keywords: Spot volatility; Market microstructure noise; Subsampling; Scale selection; Bandwidth selection
• Public URL: https://nottingham-repository.worktribe.com/output/994900
• Publisher URL: http://www.sciencedirect.com/science/article/pii/S0304407614000608
• Contract Date: Sep 13, 2017