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Assessing market microstructure effects via realized volatility measures with an application to the Dow Jones industrial average stocks
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Awartani, Basel, Corradi, Valentina and Distaso, Walter (2009) Assessing market microstructure effects via realized volatility measures with an application to the Dow Jones industrial average stocks. Journal of Business and Economic Statistics, Vol.27 (No.2). pp. 251-265. doi:10.1198/jbes.2009.0018 ISSN 0735-0015.
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Official URL: http://dx.doi.org/10.1198/jbes.2009.0018
Abstract
Transaction prices of financial assets are contaminated by market microstructure effects. This is particularly relevant when estimating volatility using high frequency data. In this article, we assess statistically the effect of microstructure noise on volatility estimators, and test the hypothesis that its variance is independent of the sampling frequency. We provide evidence based on the Dow Jones Industrial Average stocks. We find that noise has a statistically significant effect on volatility estimators at frequencies of 2-3 min or higher. The independently and identically distributed specification with constant variance seems to be a plausible model for microstructure noise, except for ultra high frequencies.
| Item Type: | Journal Article | ||||
|---|---|---|---|---|---|
| Subjects: | H Social Sciences > HC Economic History and Conditions H Social Sciences Q Science > QA Mathematics |
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| Divisions: | Faculty of Social Sciences > Economics | ||||
| Journal or Publication Title: | Journal of Business and Economic Statistics | ||||
| Publisher: | Americal Statistical Association | ||||
| ISSN: | 0735-0015 | ||||
| Official Date: | April 2009 | ||||
| Dates: |
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| Volume: | Vol.27 | ||||
| Number: | No.2 | ||||
| Number of Pages: | 15 | ||||
| Page Range: | pp. 251-265 | ||||
| DOI: | 10.1198/jbes.2009.0018 | ||||
| Status: | Peer Reviewed | ||||
| Publication Status: | Published | ||||
| Access rights to Published version: | Restricted or Subscription Access | ||||
| Funder: | Economic and Social Research Council (Great Britain) (ESRC) | ||||
| Grant number: | R000230006 (ESRC), RES-062-23-0311 (ESRC) |
Data sourced from Thomson Reuters' Web of Knowledge
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