TY - GEN
T1 - On covariance estimation for high-frequency financial data
AU - Hayashi, Takaki
AU - Yoshida, Nakahiro
PY - 2004
Y1 - 2004
N2 - We consider the problem of estimating the covariance/correlation of two diffusion prices that are observed at discrete times in a nonsynchronous manner. The modem, popular approach in the literature, "realized" estimator, which is based on the sum of cross-products of intra-day log-price changes measured on regularly-spaced intervals over a day, is problematic because choice of regular interval size and data interpolation scheme may lead to unreliable estimation. We present a new estimation procedure recently proposed by [1], which is free of such "synchronization" of data, hence, free from biases or other problems caused by it. In particular, our estimators are shown to have consistency as the observation frequency (or the market liquidity) tends to infinity, which is not possessed by the realized estimators.
AB - We consider the problem of estimating the covariance/correlation of two diffusion prices that are observed at discrete times in a nonsynchronous manner. The modem, popular approach in the literature, "realized" estimator, which is based on the sum of cross-products of intra-day log-price changes measured on regularly-spaced intervals over a day, is problematic because choice of regular interval size and data interpolation scheme may lead to unreliable estimation. We present a new estimation procedure recently proposed by [1], which is free of such "synchronization" of data, hence, free from biases or other problems caused by it. In particular, our estimators are shown to have consistency as the observation frequency (or the market liquidity) tends to infinity, which is not possessed by the realized estimators.
KW - Consistency
KW - Diffusions
KW - Nonsynchronous trading
KW - Quadratic variation
KW - Realized volatility
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UR - http://www.scopus.com/inward/citedby.url?scp=11144311841&partnerID=8YFLogxK
M3 - Conference contribution
AN - SCOPUS:11144311841
SN - 0889864179
SN - 9780889864177
T3 - Proceedings of the Second IASTED International Conference on Financial Engineering and Applications
SP - 282
EP - 286
BT - Proceedings of the Second IASTED International Conference On Financial Engineering and Applications
A2 - Hamza, M.H.
T2 - Proceedings of the Second IASTED International Conference on Financial Engineering and Applications
Y2 - 8 November 2004 through 10 November 2004
ER -