Volatility, Information Feedback and Market Microstructure Noise: A Tale of Two Regimes
نویسندگان
چکیده
منابع مشابه
On Market Microstructure Noise and Realized Volatility
The Hansen-Lunde (HL) research program is generally first-rate, displaying a rare blend of theoretical prowess and applied sense. The present paper is no exception. In a major theoretical advance, HL allow for correlation between microstructure (MS) noise and latent price. (I prefer “latent price” to terms such as “efficient price” or “true price,” which carry lots of excess baggage.) In a para...
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The notion of realized volatility as a model-free measurement of the quadratic variation of the underlying log price process loses its asymptotic validity in the presence of market microstructure noise. Should microstructure contaminations be present, the summing of an increasing number of squared return data (as in the definition of the realized volatility estimator) simply entails increasing ...
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There are two variance components embedded in the returns constructed using high-frequency asset prices: the time-varying variance of the unobservable efficient returns that would prevail in a frictionless economy and the variance of the equally unobservable microstructure noise. Using sample moments of high-frequency return data recorded at different frequencies, we provide a simple and robust...
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Recorded prices are known to diverge from their “efficient” values due to the presence of market microstructure contaminations. The microstructure noise creates a dichotomy in the model-free estimation of integrated volatility. While it is theoretically necessary to sum squared returns that are computed over very small intervals to better indentify the underlying volatility over a period, the s...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2017
ISSN: 1556-5068
DOI: 10.2139/ssrn.2921097