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

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Multivariate realised kernels : consistent positive semi-definite estimators of the covariation of equity prices with noise and non-synchronous trading. / Barndorff-Nielsen, Ole Eiler; Hansen, Peter Reinhard; Lunde, Asger et al.

In: Journal of Econometrics, Vol. 162, No. 2, 2011, p. 149-169.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

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@article{713779701b0d11dfb95d000ea68e967b,
title = "Multivariate realised kernels: consistent positive semi-definite estimators of the covariation of equity prices with noise and non-synchronous trading",
abstract = "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.",
keywords = "HAC estimator, Long run variance estimator, Market frictions, Quadratic variation, Realised variance",
author = "Barndorff-Nielsen, {Ole Eiler} and Hansen, {Peter Reinhard} and Asger Lunde and Neil Shephard",
year = "2011",
doi = "10.1016/j.jeconom.2010.07.009",
language = "English",
volume = "162",
pages = "149--169",
journal = "Journal of Econometrics",
issn = "0304-4076",
publisher = "Elsevier BV",
number = "2",

}

RIS

TY - JOUR

T1 - Multivariate realised kernels

T2 - consistent positive semi-definite estimators of the covariation of equity prices with noise and non-synchronous trading

AU - Barndorff-Nielsen, Ole Eiler

AU - Hansen, Peter Reinhard

AU - Lunde, Asger

AU - Shephard, Neil

PY - 2011

Y1 - 2011

N2 - 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.

AB - 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.

KW - HAC estimator

KW - Long run variance estimator

KW - Market frictions

KW - Quadratic variation

KW - Realised variance

U2 - 10.1016/j.jeconom.2010.07.009

DO - 10.1016/j.jeconom.2010.07.009

M3 - Journal article

VL - 162

SP - 149

EP - 169

JO - Journal of Econometrics

JF - Journal of Econometrics

SN - 0304-4076

IS - 2

ER -