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Estimating spot volatility with high-frequency financial data

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  • Zu, Yang
  • Peter Boswijk, H.

Abstract

We construct a spot volatility estimator for high-frequency financial data which contain market microstructure noise. We prove consistency and derive the asymptotic distribution of the estimator. A data-driven method is proposed to select the scale parameter and the bandwidth parameter in the estimator. In Monte Carlo simulations, we compare the finite sample performance of our estimator with some existing estimators. Empirical examples are given to illustrate the potential applications of the estimator.

Suggested Citation

  • Zu, Yang & Peter Boswijk, H., 2014. "Estimating spot volatility with high-frequency financial data," Journal of Econometrics, Elsevier, vol. 181(2), pages 117-135.
    • Handle: RePEc:eee:econom:v:181:y:2014:i:2:p:117-135
    DOI: 10.1016/j.jeconom.2014.04.001
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    More about this item

    Keywords

    Spot volatility; Market microstructure noise; Subsampling; Scale selection; Bandwidth selection;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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