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An Unbiased Measure of Integrated Volatility in the Frequency Domain

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  • Fangfang Wang

Abstract

type="main" xml:id="jtsa12137-abs-0001"> This article studies the effect of market microstructure noise on volatility estimation in the frequency domain. We propose a bias-corrected periodogram-based estimator of integrated volatility. We show that the new estimator is consistent and the central limit theorem is established under a general assumption of the noise. We also provide a feasible procedure for computing the bias-corrected estimator in practice. As a byproduct, we extract a consistent frequency-domain estimator of the long-run variance of market microstructure noise from high-frequency data.

Suggested Citation

  • Fangfang Wang, 2016. "An Unbiased Measure of Integrated Volatility in the Frequency Domain," Journal of Time Series Analysis, Wiley Blackwell, vol. 37(2), pages 147-164, March.
    • Handle: RePEc:bla:jtsera:v:37:y:2016:i:2:p:147-164
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    References listed on IDEAS

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