High-frequency covariance estimates with noisy and asynchronous financial data

Yacine At-Sahalia Jianqing Fan Dacheng Xiu

Statistics Theory and Methods mathscidoc:1912.43280

Journal of the American Statistical Association, 105, (492), 1504-1517, 2010.12
This article proposes a consistent and efficient estimator of the high-frequency covariance (quadratic covariation) of two arbitrary assets, observed asynchronously with market microstructure noise. This estimator is built on the marriage of the quasimaximum likelihood estimator of the quadratic variation and the proposed generalized synchronization scheme and thus is not influenced by the Epps effect. Moreover, the estimation procedure is free of tuning parameters or bandwidths and is readily implementable. Monte Carlo simulations show the advantage of this estimator by comparing it with a variety of estimators with specific synchronization methods. The empirical studies of six foreign exchange future contracts illustrate the time-varying correlations of the currencies during the 2008 global financial crisis, demonstrating the similarities and differences in their roles as key currencies in the global market.
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@inproceedings{yacine2010high-frequency,
  title={High-frequency covariance estimates with noisy and asynchronous financial data},
  author={Yacine At-Sahalia, Jianqing Fan, and Dacheng Xiu},
  url={http://archive.ymsc.tsinghua.edu.cn/pacm_paperurl/20191221113443545891840},
  booktitle={Journal of the American Statistical Association},
  volume={105},
  number={492},
  pages={1504-1517},
  year={2010},
}
Yacine At-Sahalia, Jianqing Fan, and Dacheng Xiu. High-frequency covariance estimates with noisy and asynchronous financial data. 2010. Vol. 105. In Journal of the American Statistical Association. pp.1504-1517. http://archive.ymsc.tsinghua.edu.cn/pacm_paperurl/20191221113443545891840.
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