Seminars & webinars
3 November 2011

Finite Sample Results of Range-based Integrated Volatility Estimation


Where: Milan
Location:

Fondazione Eni Enrico Mattei
Corso Magenta 63
20123 Milan

***
Video-conference
at FEEM Venice

How to reach: Google map
Event's Timetable:


h. 12.00 Seminar
h. 13.00 Light Lunch

Information:

Seminars Office, seminars@feem.it

Speakers:

Filippo Spazzini, Edison

Abstract

In this paper we consider the finite-sample properties of Realized Range estimators of integrated variance. We show that the combination of irregular sampling and missing observations induces a bias in the Realized Range measures. We propose a simple correction in order to reduce this bias. A Monte Carlo experiment compares the range-based estimators of integrated variance with popular realized variance estimators. Simulated data are obtained from different generating mechanisms for the instantaneous volatility process, e.g. Ornstein-Uhlenbeck, long memory and jump processes. We also evaluate the robustness of the different approaches considered when high-frequency prices are affected by bid-ask bounce and price discreteness. Simulation results confirm that realized range corrected for irregular sampling has lower bias while not increasing the estimator variance. A brief empirical application with high-frequency IBM data is also included.

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Finite Sample Results of Range-based Integrated Volatility Estimation

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