Research

Multivariate realised kernels: consistent positive semi-definite estimators of the covariation of equity prices with noise and non-synchronous trading

Publication: Research - peer-reviewJournal article

We propose a multivariate realised kernel to estimate the ex-post covariation of log-prices. We show this new consistent estimator is guaranteed to be positive semi-definite and is robust to measurement error of certain types and can also handle non-synchronous trading. It is the first estimator which has these three properties which are all essential for empirical work in this area. We derive the large sample asymptotics of this estimator and assess its accuracy using a Monte Carlo study. We implement the estimator on some US equity data, comparing our results to previous work which has used returns measured over 5 or 10 min intervals. We show that the new estimator is substantially more precise.
Original languageEnglish
JournalJournal of Econometrics
Volume162
Issue number2
Pages (from-to)149-169
Number of pages21
ISSN0304-4076
DOIs
StatePublished - 2011

See relations at Aarhus University Citationformats

ID: 19229091