Realized range-based estimation of integrated variance

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Realized range-based estimation of integrated variance. / Christensen, Kim; Podolskij, Mark.

In: Journal of Econometrics, Vol. 141, No. 2, 2007, p. 323-349.

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Christensen, Kim ; Podolskij, Mark. / Realized range-based estimation of integrated variance. In: Journal of Econometrics. 2007 ; Vol. 141, No. 2. pp. 323-349.

Bibtex

@article{adb1a7f082f211dcbd47000ea68e967b,
title = "Realized range-based estimation of integrated variance",
abstract = "We provide a set of probabilistic laws for estimating the quadratic variation of continuous semimartingales with the realized range-based variance-a statistic that replaces every squared return of the realized variance with a normalized squared range. If the entire sample path of the process is available, and under a set of weak conditions, our statistic is consistent and has a mixed Gaussian limit, whose precision is five times greater than that of the realized variance. In practice, of course, inference is drawn from discrete data and true ranges are unobserved, leading to downward bias. We solve this problem to get a consistent, mixed normal estimator, irrespective of non-trading effects. This estimator has varying degrees of efficiency over realized variance, depending on how many observations that are used to construct the high-low. The methodology is applied to TAQ data and compared with realized variance. Our findings suggest that the empirical path of quadratic variation is also estimated better with the realized range-based variance.",
keywords = "Central limit theorem, Continuous semimartingales, Integrated variance, Realized range-based variance, Realized variance",
author = "Kim Christensen and Mark Podolskij",
year = "2007",
doi = "10.1016/j.jeconom.2006.06.012",
language = "English",
volume = "141",
pages = "323--349",
journal = "Journal of Econometrics",
issn = "0304-4076",
publisher = "Elsevier BV",
number = "2",

}

RIS

TY - JOUR

T1 - Realized range-based estimation of integrated variance

AU - Christensen, Kim

AU - Podolskij, Mark

PY - 2007

Y1 - 2007

N2 - We provide a set of probabilistic laws for estimating the quadratic variation of continuous semimartingales with the realized range-based variance-a statistic that replaces every squared return of the realized variance with a normalized squared range. If the entire sample path of the process is available, and under a set of weak conditions, our statistic is consistent and has a mixed Gaussian limit, whose precision is five times greater than that of the realized variance. In practice, of course, inference is drawn from discrete data and true ranges are unobserved, leading to downward bias. We solve this problem to get a consistent, mixed normal estimator, irrespective of non-trading effects. This estimator has varying degrees of efficiency over realized variance, depending on how many observations that are used to construct the high-low. The methodology is applied to TAQ data and compared with realized variance. Our findings suggest that the empirical path of quadratic variation is also estimated better with the realized range-based variance.

AB - We provide a set of probabilistic laws for estimating the quadratic variation of continuous semimartingales with the realized range-based variance-a statistic that replaces every squared return of the realized variance with a normalized squared range. If the entire sample path of the process is available, and under a set of weak conditions, our statistic is consistent and has a mixed Gaussian limit, whose precision is five times greater than that of the realized variance. In practice, of course, inference is drawn from discrete data and true ranges are unobserved, leading to downward bias. We solve this problem to get a consistent, mixed normal estimator, irrespective of non-trading effects. This estimator has varying degrees of efficiency over realized variance, depending on how many observations that are used to construct the high-low. The methodology is applied to TAQ data and compared with realized variance. Our findings suggest that the empirical path of quadratic variation is also estimated better with the realized range-based variance.

KW - Central limit theorem

KW - Continuous semimartingales

KW - Integrated variance

KW - Realized range-based variance

KW - Realized variance

U2 - 10.1016/j.jeconom.2006.06.012

DO - 10.1016/j.jeconom.2006.06.012

M3 - Journal article

VL - 141

SP - 323

EP - 349

JO - Journal of Econometrics

JF - Journal of Econometrics

SN - 0304-4076

IS - 2

ER -