IDEAS home Printed from https://ideas.repec.org/a/wsi/serxxx/v68y2023i06ns0217590820500721.html
   My bibliography  Save this article

Noisy High Frequency Data-Based Estimation Of Volatility Function With Applications

Author

Listed:
  • JINGUAN LIN

    (School of Statistics and Mathematics, Nanjing Audit University, Nanjing, P. R. China)

  • XUGUO YE

    (��School of Science, Kaili University, Kaili, P. R. China)

  • YANYONG ZHAO

    (School of Statistics and Mathematics, Nanjing Audit University, Nanjing, P. R. China)

  • HONGXIA HAO

    (School of Statistics and Mathematics, Nanjing Audit University, Nanjing, P. R. China)

Abstract

Diffusion models have been widely used to describe the stochastic dynamics of the underlying economic variables. Renò (2008) introduced a nonparametric estimator of the volatility function, which is based on the estimation of quadratic variation between observations by means of realized variance. However, they may be misleading when one uses intraday data to implement directly the estimator, because intraday data display microstructure effects that could seriously distort the estimation. To filter out the impact of microstructure noise on the estimation of the volatility function, in this paper we propose an improved estimator when there is microstructure noise in the observed price. Also, we show that the proposed estimator has the same asymptotic properties as the Renò estimator when the step of discretization inclines to zero. Some simulations and empirical applications on Shanghai Stock Exchange data from March 3, 2002 to December 31, 2008 are used to illustrate the finite sample performance of the proposed estimator.

Suggested Citation

  • Jinguan Lin & Xuguo Ye & Yanyong Zhao & Hongxia Hao, 2023. "Noisy High Frequency Data-Based Estimation Of Volatility Function With Applications," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 68(06), pages 2127-2150, December.
    • Handle: RePEc:wsi:serxxx:v:68:y:2023:i:06:n:s0217590820500721
    DOI: 10.1142/S0217590820500721
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0217590820500721
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0217590820500721?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Volatility function; nonparametric estimation; high-frequency data; microstructure noise;
    All these keywords.

    JEL classification:

    • 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
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:serxxx:v:68:y:2023:i:06:n:s0217590820500721. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ser/ser.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.