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Test of Unbiasedness of the Integrated Covariance Estimation in the Presence of Noise

Author

Listed:
  • Masato Ubukata

    (Graduate School of Economics, Osaka University)

  • Kosuke Oya

    (Graduate School of Economics, Osaka University)

Abstract

The cumulative covariance estimator in Hayashi and Yoshida (2005) which suits for non-synchronous observations possibly has a bias in the presence of the observational noise. We propose the test statistic to detect whether the observational noise causes a measurable bias in the estimator of Hayashi and Yoshida (2005). The test statistic proposed in this paper is asymptotically distributed as standard normal under null hypothesis. The finite sample performance of the test statistic is investigated through Monte Carlo simulation.

Suggested Citation

  • Masato Ubukata & Kosuke Oya, 2007. "Test of Unbiasedness of the Integrated Covariance Estimation in the Presence of Noise," Discussion Papers in Economics and Business 07-03-Rev, Osaka University, Graduate School of Economics, revised Mar 2008.
    • Handle: RePEc:osk:wpaper:0703r
    as

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    More about this item

    Keywords

    test statistic; integrated covariance; non-synchronous observation; observational noise; market microstructure noise;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other

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