On covariance estimation for high-frequency financial data

Takaki Hayashi, Nakahiro Yoshida

Research output: Chapter in Book/Report/Conference proceedingConference contribution

1 Citation (Scopus)

Abstract

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.

Original languageEnglish
Title of host publicationProceedings of the Second IASTED International Conference On Financial Engineering and Applications
EditorsM.H. Hamza
Pages282-286
Number of pages5
Publication statusPublished - 2004 Dec 1
EventProceedings of the Second IASTED International Conference on Financial Engineering and Applications - Cambridge, MA, United States
Duration: 2004 Nov 82004 Nov 10

Publication series

NameProceedings of the Second IASTED International Conference on Financial Engineering and Applications

Other

OtherProceedings of the Second IASTED International Conference on Financial Engineering and Applications
CountryUnited States
CityCambridge, MA
Period04/11/804/11/10

    Fingerprint

Keywords

  • Consistency
  • Diffusions
  • Nonsynchronous trading
  • Quadratic variation
  • Realized volatility

ASJC Scopus subject areas

  • Engineering(all)

Cite this

Hayashi, T., & Yoshida, N. (2004). On covariance estimation for high-frequency financial data. In M. H. Hamza (Ed.), Proceedings of the Second IASTED International Conference On Financial Engineering and Applications (pp. 282-286). [437-801] (Proceedings of the Second IASTED International Conference on Financial Engineering and Applications).