Ultra high frequency volatility estimation with dependent microstructure noise

Authors:
  • YAYacine Ait-Sahalia
    Yacine Ait-Sahalia
  • PMPer A. Mykland
    Per A. Mykland
  • LZLan Zhang
    Lan Zhang
Preprint
Publisher website
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  • 1 January 2005
Abstract
We analyze the impact of time series dependence in market microstructure noise on the properties of estimators of the integrated volatility of an asset price based on data sampled at frequencies high enough for that noise to be a dominant consideration. We show that combining two time scales for that purpose will work even when the noise exhibits time series dependence, analyze in that context a refinement of this approach based on multiple time scales, and compare empirically our different estimators to the standard realized volatility.
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