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NBER Working Papers and Publications
|June 2011||A Functional Filtering and Neighborhood Truncation Approach to Integrated Quarticity Estimation|
with Torben G. Andersen, Ernst Schaumburg: w17152
We provide a first in-depth look at robust estimation of integrated quarticity (IQ) based on high frequency data. IQ is the key ingredient enabling inference about volatility and the presence of jumps in financial time series and is thus of considerable interest in applications. We document the significant empirical challenges for IQ estimation posed by commonly encountered data imperfections and set forth three complementary approaches for improving IQ based inference. First, we show that many common deviations from the jump diffusive null can be dealt with by a novel filtering scheme that generalizes truncation of individual returns to truncation of arbitrary functionals on return blocks. Second, we propose a new family of efficient robust neighborhood truncation (RNT) estimators for int...
Published: Andersen, Torben, Dobrislav Dobrev and Ernst Schaumburg. 2014. A Robust Neighborhood Truncation Approach to Estimation of Integrated Quarticity. Econometric Theory. 30: 3-59.
|November 2009||Jump-Robust Volatility Estimation using Nearest Neighbor Truncation|
with Torben G. Andersen, Ernst Schaumburg: w15533
We propose two new jump-robust estimators of integrated variance based on high-frequency return observations. These MinRV and MedRV estimators provide an attractive alternative to the prevailing bipower and multipower variation measures. Specifically, the MedRV estimator has better theoretical efficiency properties than the tripower variation measure and displays better finite-sample robustness to both jumps and the occurrence of "zero'' returns in the sample. Unlike the bipower variation measure, the new estimators allow for the development of an asymptotic limit theory in the presence of jumps. Finally, they retain the local nature associated with the low order multipower variation measures. This proves essential for alleviating finite sample biases arising from the pronounced intraday v...
Published: Andersen, Torben G. & Dobrev, Dobrislav & Schaumburg, Ernst, 2012. "Jump-robust volatility estimation using nearest neighbor truncation," Journal of Econometrics, Elsevier, vol. 169(1), pages 75-93. citation courtesy of
|March 2007||No-Arbitrage Semi-Martingale Restrictions for Continuous-Time Volatility Models subject to Leverage Effects, Jumps and i.i.d. Noise: Theory and Testable Distributional Implications|
with Torben G. Andersen, Tim Bollerslev: w12963
We develop a sequential procedure to test the adequacy of jump-diffusion models for return distributions. We rely on intraday data and nonparametric volatility measures, along with a new jump detection technique and appropriate conditional moment tests, for assessing the import of jumps and leverage effects. A novel robust-to-jumps approach is utilized to alleviate microstructure frictions for realized volatility estimation. Size and power of the procedure are explored through Monte Carlo methods. Our empirical findings support the jump-diffusive representation for S&P500 futures returns but reveal it is critical to account for leverage effects and jumps to maintain the underlying semi-martingale assumption.
Published: Andersen, Torben G. & Bollerslev, Tim & Dobrev, Dobrislav, 2007. "No-arbitrage semi-martingale restrictions for continuous-time volatility models subject to leverage effects, jumps and i.i.d. noise: Theory and testable distributional implications," Journal of Econometrics, Elsevier, vol. 138(1), pages 125-180, May. citation courtesy of