TY  - JOUR
AU  - Brandt,Michael W.
AU  - Diebold,Francis X.
TI  - A No-Arbitrage Approach to Range-Based Estimation of Return Covariances and Correlations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9664
PY  - 2003
Y2  - May 2003
UR  - http://www.nber.org/papers/w9664
L1  - http://www.nber.org/papers/w9664.pdf
N1  - Author contact info:
Michael W. Brandt
Fuqua School of Business
Duke University
One Towerview Drive
Durham, NC  27708
Tel: 919/660-1948
Fax: 919/660-8038
E-Mail: mbrandt@duke.edu

Francis X. Diebold
Department of Economics
University of Pennsylvania
3718 Locust Walk
Philadelphia, PA  19104-6297
Tel: 215/898-1507
Fax: 212/573-4217
E-Mail: fdiebold@sas.upenn.edu
AB  - We extend range-based volatility estimation to the multivariate case. In particular, we propose a range-based covariance estimator motivated by a key financial economic consideration, the absence of arbitrage, in addition to statistical considerations. We show that this estimator is highly efficient yet robust to market microstructure noise arising from bid-ask bounce and asynchronous trading.
ER  -